An additional increase in interest rates may be necessary to combat rising prices.

Written by Keisha B. Ta-asan, Reporter

The central bank of the Philippines.

The BSP may have to raise interest rates again next month in order to lessen the effects of inflation.fl

Analysts stated that the BSP may not need to increase rates further due to a possible break in inflationary pressures caused by a potential pause from the US Federal Reserve.

According to Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., there are higher potential risks for an increase. flation such as rising oil prices due to heightened geopolitical tensions in the Middle East.

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“We may require additional interest rate increases in order to control inflation.”flation,” he said in a Viber message.   

Diwa C. Guinigundo, a Country Analyst at GlobalSource Partners, stated thatfl

The increase in the nation’s trend may persist following the sudden rise observed in August and September, along with elevated electricity costs, transportation fees, and salaries.

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He stated in a Viber message that achieving a 2-4% inflation target could potentially disrupt inflation expectations.

“The BSP’s proposed forward guidance suggests that the BSP is preparing to tighten its monetary policy. In my opinion, this is the most suitable course of action,” he stated.

Earlier, Governor Eli M. Remolona, Jr. of the BSP stated that he is considering a possible increase of 25 basis points during their Nov. 16 meeting, following a consecutive rise in inflation to 6.1% in September.

September marked the 18^th straight month that infl

The central bank’s target of 2-4% has been exceeded in the current year.flation averaged 6.6%.   

The BSP observes an average.fl

There will be a rise in inflation of 5.8% this year, followed by a decrease to 3.5% in 2024 and 3.4% in 2025.   

Mr. Remolona has suggested that there may be an unexpected increase in interest rates, however, the BSP will need to examine the most recent information before determining a course of action.

The average at China Banking Corp., according to Chief Economist Domini S. Velasquez, has been increased.fl

The projected growth rate is expected to reach 5.9% by the year 2023.

Slightly above the BSP’s predicted amount.

Ms. Velasquez stated that there is a higher likelihood of BSP raising its policy rate if the Fed also raises its rates in order to maintain stable interest rate differentials.   

The upcoming policy meeting for the US Federal Reserve is set to take place on November 2. In a previous announcement, the Fed indicated that it plans to maintain higher interest rates for an extended period of time, despite leaving the target Fed fund rate unchanged at 5.25-5.5% last month.   

“Despite this, our primary forecast remains that there is a reduced necessity for increasing interest rates, as the BSP has likely taken sufficient action with previous cumulative rate hikes. Additionally, the majority of recent disruptions are attributed to supply-related factors,” stated Ms. Velasquez.   

The Monetary Board has maintained the key interest rate at 6.25%, which is close to its highest level in 16 years. This decision was made after raising borrowing expenses by 425 basis points between May 2022 and March 2023.   

flation exceeds its target

Enrico P. Villanueva, a senior lecturer in Economics at the University of the Philippines Los Baños, stated that the BSP may raise interest rates if the October inflation surpasses its target.fl

The process is significantly quicker.

He stated in a message that the BSP is aware of the effects on growth and should take into account the delays in the impact of past rate increases.   

The statistics bureau plans to publish the inflation figures for October on November 7th, and the GDP data for the third quarter on November 9th.   

fectively, the Federal Reserve implemented a new framework

To reduce the fluctuations in the currency market and efficiently handle dollar reserves, the Federal Reserve established a new system.fi

According to Mr. Ravelas, the BSP has the ability to utilize sophisticated data analysis and artificial intelligence, which can aid in minimizing currency risks and maintaining stable exchange rates.   

During a media conference on Friday, Richard Yorke, the Asia Pacific head of global corporate and investment banking at MUFG Bank, stated that the United States may have reached the conclusion of its tightening cycle.

Interest rates are expected to reach their peak soon and the economy is starting to show signs of improvement. We are cautiously optimistic about the current trends.

“We are anticipating the eventual increase in interest rates and it seems that we are nearing the end of this upward trend. As a result, we are observing a gradual improvement in economic conditions. Despite this, we maintain a cautious optimism towards the current developments.”fi

“He stated that having trust and confidence from our clients is crucial in making investment decisions.”   

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The Philippines is still dealing with concerns regarding poverty and corruption.   

“In the past, the BSP has generally mirrored the actions of the Fed. However, the BSP will need to consider a multitude of factors specific to the Philippines,” she stated.   

However, despite a more restrictive interest rate climate, the MUFG executives expressed confidence in the continued robust economic growth of the Philippines, citing new investment initiatives and business prospects in the country.   

According to Mr. Guinigundo, restarting the process of increasing interest rates may negatively impact the growth of the economy.   

According to him, the elevated level of core inflation is a sign of strong demand pressure, which can be controlled through monetary policy as the economy grows.   

Core infl

The September year-on-year core inflation, which does not include the fluctuating prices of food and fuel, decreased to 5.9%, a drop from the 6.1% seen in August. So far this year, core inflation is at 5.9%.flation averaged 7.2%.   

same period last year

In the second quarter, the economy of the Philippines expanded by 4.3%, which is significantly lower compared to the growth of 6.4% during the same period in the previous year. fi

During the first quarter, there was a decrease of 4.3% compared to the same time period last year. In the second quarter, there was a 7.5% decrease compared to the previous year.

During the initial half, the growth of GDP was 5.3%, which falls short of the government’s goal of 6-7% by 2023.