The Minister of Economics for the Philippines issued a warning on Friday against increasing central bank interest rates, citing potential harm to consumers who are already struggling with high inflation.
“I would not support rate hikes if I were on the monetary board. Our region has seen the most significant increases in interest rates,” stated Arsenio M. Balisacan, Secretary of the National Economic and Development Authority (NEDA).
The rate of yearly inflation increased for the second consecutive month in September, primarily due to a faster rise in the costs of food and transportation. This raises the likelihood that the central bank will raise interest rates again at its November meeting.
In September, the inflation rate was 6.1%, the highest it has been in four months and surpassing August’s rate of 5.3%. This brought the average inflation for the year so far to 6.6%, which is significantly higher than the central bank’s target of 2%-4%.
However, according to Mr. Balisacan, who is not a part of the monetary board responsible for making policy decisions at the central bank, increasing interest rates could potentially harm both the economy and consumers.
According to Mr. Balisacan, the cause of inflation is on the supply side and not on the demand side, therefore a monetary solution is not needed.
He expressed concern about the potential effects of increased interest rates on the peso, which could result in a stronger local currency and higher costs for the country’s exports.
According to Mr. Balisacan, a weaker peso can potentially lead to faster economic growth.
“Although there are potential factors that could hinder growth, Mr. Balisacan expressed that the government remains committed to achieving its goal of 6.0%-7.0% for the year.” – Reuters