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The Philippines Finance Minister: Room to Pause on Rate Hikes Despite US Fed’s Tightening

MANILA: The Philippines’ finance minister, Benjamin Diokno, stated that there is room for the country’s monetary authorities to pause on rate hikes in August, despite the recent policy tightening by the US Federal Reserve. In his weekly media briefing, Finance Secretary Diokno expressed his view that the Philippines does not necessarily have to match the rate hikes implemented by the US. He believes that it is important to monitor other indicators, such as inflation, when deciding on monetary policies. Diokno’s comments, made on Friday, were embargoed until Monday.

The Monetary Board, of which Diokno is a member, is responsible for setting the central bank’s benchmark rate. The board is scheduled to meet on August 17 to discuss this matter. Currently, the benchmark rate stands at 6.25 per cent, following a series of 425 basis points hikes since May last year. Although the Monetary Board currently has four members, including the central bank governor, three seats still remain vacant.

Diokno mentioned that inflation is anticipated to return to the central bank’s target range of 2 per cent to 4 per cent in the fourth quarter. Headline inflation has been on a downward trend for the past five months, recording a rate of 5.4 per cent in June. However, in the first half of the year, inflation remained high at 7.2 per cent.

In regard to curbing consumer price pressures, Bangko Sentral ng Pilipinas Governor Eli Remolona stated that it is too early to claim victory. He highlighted the challenges posed by high core inflation and persistent upside risks. Diokno emphasized that authorities will consider all the relevant data and evaluate the impact of the US Fed rate hike on both the local and global economy.

The US Federal Reserve raised interest rates by a quarter percentage point on July 26, in line with market expectations. They have also not ruled out the possibility of further rate hikes if the data justifies it.

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