Diokno: PH interest rates at peak level

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 said there is no rationale to warrant further increase in interest rates.

“We have reached the peak,” Diokno, 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.”

In an unexpected move on 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 six percent and seven percent, respectively.

Diokno, meanwhile, said 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. had earlier said 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.