MANILA— The Philippines central bank sees “no urgency” to change its monetary policy settings, its governor said on Thursday, after economic growth slowed for a third straight quarter between April and June.
The Bangko Sentral ng Pilipinas (BSP) has kept interest rates PHCBIR=ECI steady at 6.25% at its last two meetings, after nine rate hikes totalling 425 basis points to curb inflation.
When asked if the BSP can continue holding rates, Governor Eli Remolona told Reuters: “It is possible”.
He said the slowdown in second-quarter growth was “a cause for concern because it was not expected”, but added he sees the economy regaining momentum.
The Philippines‘ gross domestic product grew 4.3% in the quarter ending June, government data showed, its slowest growth print in nearly 12 years, due to a contraction in public spending, high inflation, and borrowing costs.
Monetary tightening will bring inflation back to within target range by the fourth quarter, giving the BSP cause for a prudent pause, Remolona told lawmakers earlier on Thursday. Inflation in the seven months to July stood at 6.8%, well outside the central bank’s 2%-4% target for the year.
Remolona said the BSP is comfortable with its interest rate differential with the U.S. Federal Reserve, which in July raised interest rates by a quarter of a percentage point to within a 5.25%-5.50% range.
Rate cuts will happen “eventually” and “at the right time” when inflation gets back firmly to within target, Remolona said.
—Reporting by Neil Jerome Morales; Editing by Kanupriya Kapoor