Medalla hints at 50bp upside.

AFTER headline inflation hit a new three-year high of 6.4 percent last month, Gov. Felipe Medalla hinted on Friday that Bangko Sentral ng Pilipinas (BSP) could once again aggressively raise interest rates.

He stated this during a forum organized by the Federation of Philippine-Chinese Chambers of Commerce Inc. that the most recent inflation figures clearly “raise the likelihood” of a 50 basis point (bp) rate hike by the central bank “rather than 25 [bps].”

Medalla, however, said that if external development suddenly improves, he cannot rule out the possibility of a much smaller 25 basis point rate hike.

“For example, if tomorrow the news reports that OPEC oil prices have fallen to $80 per [per barrel]Of course, this is wishful thinking. it [rate hike] approaching 25, not 50 [bps],” he explained.

OPEC – Organization of Petroleum Exporting Countries.

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The Philippine monetary authorities predict that the average price of crude oil will be around $106.30 a barrel this year, $95.30 a barrel in 2023, and $84.10 in 2024. $100.04 and $89.50 per barrel, respectively.

High oil prices are one of the reasons BSP announced a 17 basis point off-cycle rate hike on July 15 last year, following two consecutive 25 basis point rate hikes in May and June, along with the depreciation of the peso and other external factors.

The central bank’s rates on loans, deposits and overnight loans are currently 3.25%, 2.75% and 3.75% respectively.

Medalla expressed confidence in the economy’s ability to maintain the tight monetary policy that Bangko Sentral is pursuing to reduce inflation.

The currency board, which sets the policy, expects it to average 5 percent, up from 4.6 percent earlier and above the target of 2 to 4 percent.