Dominguez spurns calls for early rate hike

Philippine Finance Secretary Carlos Dominguez, a member of the central bank’s Monetary Board, said there’s no need for an out-of-cycle interest-rate increase as policy makers are focusing on the longer-term inflation outlook.

“We have decided not to have an offcycle rate hike before September 27,” Dominguez told reporters on the sidelines of a closed-door inflation briefing in the Senate on Friday. “We have to take a long-term view, because if not, every little bump becomes a major crisis.”

Capital Economics Ltd. was among those predicting the central bank may raise rates earlier than its scheduled meeting this month after inflation surged to a nine-year high and central bank Governor Nestor Espenilla said an unscheduled policy meeting is an option. Speculation for an early rate hike had also risen after the peso slumped to the lowest level against the dollar since 2005 this week.

“That’s good if they can wait to remove the impression of panic,” said Emilio Neri, chief economist at Bank of the Philippine Islands in Manila. “The Bangko Sentral ng Pilipinas can deploy other tools anyway, to achieve the same objective.”

Central banks in Asia and elsewhere are intensifying the battle against the rout sweeping across emerging markets. Indonesia’s central bank governor earlier this month pledged to take “preemptive” steps to be ahead of the curve as the rupiah weakens.

Inflation in the Philippines quickened to 6.4 percent in August, well above the central bank’s target for an annual average of 2 percent to 4 percent. Policy makers have delivered 100 basis-points of rate increases since May, including a 50 basis-point hike in August. (Bloomberg)