The Bangko Sentral ng Pilipinas (BSP) maintains a hawkish stance on interest rates to combat inflation in the country.

National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan on Thursday said the BSP’s policy decisions are based on domestic economic conditions and do not solely rely on the actions of the United States Federal Reserve.

“The BSP considers various factors, and mirroring US Fed cuts wouldn’t be a direct response. Our focus remains on managing domestic inflation and ensuring economic growth,” Balisacan said. “The BSP’s policy rates are guided by various factors, including inflation, interest rate differentials with the US Fed, and exchange rate movements.”

“While inflation has been a major concern in recent adjustments, we believe the BSP will ease policy rates when inflation numbers show sustained moderation within the target range,” he added.

Balisacan underscored the importance of non-monetary measures in managing inflation alongside the BSP’s monetary policy, saying that economic managers remain committed to keeping inflation within its target range of 2 to 4 percent amid the rise in food prices in the country.

He also stressed the government’s multi-pronged approach to address rising prices, particularly food costs, which significantly contribute to inflation.

“We are working very hard to address the non-monetary measures that are contributing to the recent rise in inflation,” Balisacan said, as he acknowledged inefficiencies in the market system and highlighted the Department of Agriculture’s (DA) proposed measures to improve logistics and distribution.

“The DA has proposed a package of measures to the President and the Cabinet. This includes attracting private sector investment in logistics and distribution to narrow the gap between what farmers receive and what consumers pay for food,” he added.

While acknowledging the BSP’s hawkish stance due to March’s inflation projection of a 3.4 to 4.2 percent range, Balisacan said the government’s plans to mitigate its impact on growth.

The government, he said, is also closely monitoring global food markets, particularly rice prices. While global food prices have risen, forecasts predict a decline in the second half of 2024 due to the weakening El Niño phenomenon.

This, in turn, should lead to price moderation in the Philippines.