Finance Secretary Benjamin E. Diokno believes that borrowing costs have reached their peak.
Diokno stated that there is no valid justification for higher interest rates, considering the decline in inflation.
The central bank raised its benchmark rate to a 16-year high of 6.5 percent in an off-cycle move on Oct. 26.
The central bank signaled its readiness to take further policy action if necessary to bring inflation back within the target range of 2 to 4 percent.
Diokno expects a slowdown in inflation and projects faster economic growth in the third quarter compared to April-June.
The BSP projects that October 2023 inflation will be between 5.1 to 5.9 percent, lower than September 2023's 6.1 percent.
BSP Governor Eli M. Remolona Jr. suggested that the current slowdown in inflation may be temporary, anticipating inflation to rise again in the near future.
Diokno: PH interest rates at peak level
At a glance
Finance Secretary Benjamin E. Diokno believes that borrowing costs in the country have hit a ceiling.
On the sidelines of the Retail Dollar Bond 2 listing on the Philippine Dealing and Exchange Board on Monday, Nov. 6, Diokno stated that there is no rationale to warrant a further increase in interest rates.
“We have reached the peak,” Diokno, who is a member of the Monetary Board, the policy-setting body of the Bangko Sentral ng Pilipinas (BSP), told reporters.
“Given the decline in inflation, there’s no justification for higher interest rates,” he added.
In an unexpected move last Oct. 26, the BSP raised its benchmark rate to a 16-year high of 6.5 percent.
This rate hike was conducted on an off-cycle basis, as the Monetary Board was not scheduled to meet and deliberate on monetary policy until Nov. 16.
The central bank has emphasized its willingness to take further policy actions as needed to ensure that inflation returns to the target range of two percent to four percent.
As a result of the BSP decision, the interest rates for the overnight deposit and lending facilities have been adjusted to 6.0 percent and 7.0 percent, respectively.
Diokno, meanwhile, that inflation likely slowed down last month.
The BSP has projected that inflation in October will be between 5.1 percent and 5.9 percent, lower than the 6.1 percent recorded in September.
However, BSP Governor Eli M. Remolona Jr. earlier said that the current slowdown in inflation may be temporary, as he expects consumer prices to rise again in the near future.
Last year, the central bank implemented similar off-cycle rate hikes with the aim of controlling inflation and aligning with the significant rate hikes implemented by the US Federal Reserve.