The Bangko Sentral ng Pilipinas (BSP) can consider cutting interest rates if inflation is no longer seen as a threat, the Finance chief said.
“I foresee, with declining inflation, and as long as we are sure there are no more threats on inflation, we can cut interest rates, maybe,” Finance Secretary and Monetary Board Member Benjamin E. Diokno said in a televised interview on ANC on Tuesday.
“We have to do it gradually. I think there’s a lot of liquidity in the system, a lot of people are spending,” he added.
The BSP’s policy-setting Monetary Board kept its key interest rate at 6.25% for the second straight meeting in June.
The central bank hiked borrowing costs by a total of 425 basis points (bps) from May 2022 to March 2023.
The Monetary Board’s next policy meeting is on August 17.
The BSP sees inflation reaching its 2-4% target band by the fourth quarter this year.
Mr. Diokno said he expects inflation to ease further in the coming months.
“Inflation now is tapering off and will be within target range by the fourth quarter… In fact, there’s a possibility, unless there are other shocks, that we might even overshoot. It might even be below 2% by the first quarter of 2024,” he added.
Food and fuel inflation are not a cause for concern, Mr. Diokno said.
“Food inflation has been going down. There’s an uptick of prices but that is part of the food inflation,” he said.
“On fuel, the assumption of the BSP is that as long as the price of oil in the world does not exceed USD 90 per barrel, right now it’s around $80 per barrel, but it should not concern the inflation-targeting central bank,” he added.
Typhoon Egay (international name: Doksuri) will also not disrupt prices materially, Mr. Diokno said.
“Even with the slight increase in food prices and I assume vegetable (prices) will go up too because of the typhoon, we are okay, we will hit the projection of 2-4% within the fourth quarter this year,” he added. — L.M.J.C. Jocson