​Medalla: No more off-cycle rate hikes, up to half-point increase possible in August

Metro Manila (CNN Philippines, July 26) — Unscheduled interest rate hikes like the one announced this month are already off the table in the fight against stubborn inflation, the Bangko Sentral ng Pilipinas (BSP) said Tuesday.

"One thing I can say is you can surprise people only once. There will be no more off-cycle [hikes]," BSP Governor Felipe Medalla said during an economic briefing held a day after President Ferdinand "Bongbong" Marcos Jr.'s first State of the Nation Address.

After a back-to-back quarter-percentage point or 25-basis point increase in May and June, the central bank increased the key interest rate by three-quarters of a point or 75 bp this month, ahead of the Aug. 18 Monetary Board meeting.

Medalla did not say how many rate hikes could still be in place this year, citing the data-dependent nature of these decisions. After August, the remaining policy meetings for the year are set on Sept. 22, Nov. 17 and Dec. 15.

However, he hinted that an upward adjustment between a quarter of a point, and half a point or 50 bp is possible next month.

"If you are to bet on four numbers — 0, 25, 50, 75 — just like in diving, you can rule out the lowest and the highest," said the BSP chief on how large August's rate hike could be.

Banks and lending firms use central bank rates as a benchmark for loan, credit card, and deposit rates. Higher rates mean it's more expensive to borrow, prompting the public to spend less and save more, effectively lessening the amount of money going around. Monetary policy authorities use rate hikes to crack down on inflation.

In the Philippines, prices of commodities having risen their fastest in nearly four years in June at 6.1%.

Medalla conceded that inflation will average above the BSP's 2-4% target band for the year, citing inflationary supply-side pressures from abroad.

Year-to-date inflation is already at 4.4%, quicker than the 4.1% average logged from January to May.