"One thing I can say is you can surprise people only once, so there will be no more off-cycle (monetary policy move)," Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla told an economic forum.
As to how many more rate hikes before the end of the year, Medalla said, "that will be very data dependent."
Medalla said the BSP carefully balances "forces changes that say there will be more rate hikes, but not too much. But there are also forces that as long as the U.S. is jacking up rates (it is) very hard for the small open economy not to respond at least partially."
The Monetary Board will meet next month. "My guess is, if you are to bet on four numbers, zero, 25, 50, 75, you can rule out the lowest and the highest. Come to this August meeting, we can rule out zero and we can rule out 75," Medalla said.
"For the rest of the year, it all depends on what happens outside the Philippines," he added.
On July 14, the BSP's Monetary Board decided to hike the interest rate on the overnight reverse repurchase facility again by 75 basis points to 3.25 percent effective immediately to curb a surging inflation. The BSP's policy-making body also decided to raise the interest rates on the overnight deposit and lending facilities to 2.75 percent and 3.75 percent, respectively.
The BSP increased the policy rate three times this year by 25 basis points, another 25 basis points, and then a surprise 75 basis points. "It was a surprise because it was not in the calendar to meet on interest, and 75 was considered large," he said.
However, Medalla said the BSP monetary policy still supports economic growth. "Indeed, the policy rate, which used to be a record-low 2 percent, is now just 3.25 percent, so by and large, our estimate is the economy can absorb an increase in the policy rate," he added.
Despite all the increase in the policy rate, Medalla said the government's forecast of 6.5 percent to 7.5 percent gross domestic product (GDP) this year "is well within reach." He added that the targets of 6.5 percent to 8 percent GDP forecast for 2023 and onwards "are still quite attainable."
Medalla said the government projects inflation to remain elevated this year, adding that inflationary forces outside the Philippines are just "too high."
The average inflation rate assumption for 2022 remains elevated and is projected to range from 4.5 percent to 5.5 percent, following the uptick in fuel and food prices due to the ongoing Russia-Ukraine conflict and disrupted supply chains.
The government adjusted the inflation target to 2.5 percent to 4.5 percent for 2023 and 2.0 percent to 4.0 percent from 2024 until 2028.
The economic team held the briefing following Philippine President Ferdinand Romualdez Marcos' speech on Monday to implement "a sound fiscal management" and build better infrastructure, so as to make the Philippines an investment destination and immediately address the "economic scarring" brought about by the COVID-19 pandemic.
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