Filipino consumers brace for higher interest rates

‘Double-edged’ BSP move to hit loan-dependent households, say groups

Two consumers rights groups have expressed wariness about the expected rate hike of the Bangko Sentral ng Pilipinas (BSP) expected today, expressing concerns about the double-sided effect of the measure on the lives of Filipino consumers.

Alliance of Concerned Consumers in the Philippines (ACCOP) convenor Ritchie Horario told the Inquirer that the expected increase in interest rate by the central bank will consequently slow down growth in lending activities.

“Because of the higher borrowing rates and loan rates, consumers will think twice before they proceed with their loans,” Horario said, adding that people who rely much on loans and the use of credit cards will be affected by the BSP’s move.

Since the increase is already inevitable, consumers should discern if they really need to push through with their loans or if it is really necessary to use credit cards in all of their transactions.

Meanwhile, Rights Action Philippines (RAP) chair Rey Dulay also expressed apprehension toward the BSP’s plan, saying that raising the rates too high will have dire consequences for consumers.

“Although it could help in slowing down inflation rate, the government should be careful and study further hikes because it could trigger a recession,” Dulay told the Inquirer in a phone interview.

Domino effect

“Raising it too much will limit those who can access credit and borrow from banks, and many people are still just trying to recover from the pandemic,” he added, this could lead to a number of domino effects, such as job losses and closure of local, small-time businesses.

For 38-year-old entrepreneur Sebastian Caballero, further rate hikes are complicating his plans to take out loans, saying that borrowing rates may become more expensive in the future.

“For the home loan, I’m pushed to get a loan now because it looks like the rates will even be higher in the future,” he told the Inquirer, citing he is also mulling to just borrow from his brother to save on costs.

The BSP is expected to announce a rate hike of 0.75 percentage point today, in an effort to match that of the United States’ Federal Reserve, thereby bringing it to 5 percent.

BSP Governor Felipe Medalla made the announcement earlier this month following the Fed’s announcement that their target range for the federal funds rate was raised to 3.75 percent to 4 percent from the 3 percent to 3.25 percent that

was in place since Sept. 21.

The consumer price index climbed 7.7 percent in October compared to last year—the fastest rise since December 2008—driven by price gains in key commodity groups, specifically food and non-alcoholic beverages

Earlier this month, National Statistician Dennis Mapa said he was not certain that inflation had peaked in October, citing there was substantial probability that it could be higher in the succeeding month of November.

The October inflation number puts the year-to-date figure at 5.4 percent, within close proximity of the BSP’s most recent projection range of 5.6 percent to 5.7 percent.