Philippine Central Bank Maintains Interest Rate at 6.25%

On Thursday, the Philippine central bank maintained its benchmark interest rate at 6.25 percent for the second consecutive meeting, and its governor hinted that the rate could remain there for a longer period of time with inflation on the down.

In the absence of any policy surprises from the Federal Reserve, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said the central bank could afford to extend the rate hike halt for a third consecutive meeting.

"Clearly, a pause will be at least three meetings, in my opinion." "Now we have two," Medalla remarked after presiding over what could be his final policy meeting unless reappointed by President Ferdinand Marcos Jr.

Medalla is serving out the remainder of the term of current Finance Secretary Benjamin Diokno, which expires next month. A decision on the top BSP position is likely within the next few days.

While the BSP is confident that inflation will return to its target range of 2% to 4% by October, Medalla said the BSP may be forced to act if the Fed delivers a large raise in order to maintain the Philippines-US rate differential constant.

Keeping interest rates stable on Thursday "was a clear choice," Medalla said, considering the risks of inflation from transport and pay rises, as well as the predicted slowing of economic growth.

The BSP's latest consumer price forecast showed inflation would average 5.4 per cent in 2023, slightly lower than its earlier projection of 5.5 per cent. For next year, inflation is expected to average 2.9 per cent, a tad higher than its earlier forecast of 2.8 per cent.