(Aug 10): The Philippine central bank is ready to tighten monetary policy further to guide inflation back to target, governor Eli Remolona said, while adding that there’s less pressure to do so after last quarter’s surprise economic slowdown.
“The question is what you need to bring inflation back down,” Remolona told reporters on Monday, when asked whether the economy can handle more interest rate hikes. He added that the Bangko Sentral ng Pilipinas (BSP) is prepared to tighten policy “as much as necessary to bring inflation down to target”.
The governor’s remarks signal that the BSP is prepared to sustain its monetary tightening cycle, despite the Southeast Asian nation’s economic growth slumping further last quarter. Monetary authorities, who have raised interest rates by 50 basis points this year, will hold their next rate-setting meeting on Aug 27.
Remolona pointed out that the BSP’s mandate is to maintain price stability, and keeping the economy growing is implied by that mandate.
“In the short-run, there’s a problem on growth,” the central bank chief said. He nevertheless said yes when asked if the disappointing economic growth reduces the pressure on the BSP to tighten monetary policy.
While easing further in July, inflation in the Southeast Asian nation is still way beyond the the central bank’s 3% target for the year. Still, BSP deputy governor Zeno Abenoja separately told reporters that core inflation, which excludes some food and energy items, may have already plateaued.
The Philippines has posted the slowest economic growth among Southeast Asian nations that have reported April to June figures. The country is battling elevated inflation from the Iran war that has decimated household consumption, as well as weak investment due to a graft scandal in flood-related infrastructure.
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