IMF supports BSP rate hike to cool inflation

By Julito G. Rada

THE International Monetary Fund supports any move by the Bangko Sentral ng Pilipinas to further increase interest rates to bring back inflation within the target range of 2 percent to 4 percent.

This was contained in a statement after an IMF team led by Shanaka Jay Peiris held meetings in Manila from May 8 to 12 to discuss economic and financial developments and the outlook for the Philippine economy.

“Risks to inflation remain on the upside, and a continued tightening bias may be appropriate until inflation falls decisively within the 2 to 4 percent target range,” the IMF said.

Inflation hit a 14-year high of 8.7 percent in

January 2023 after surpassing the target range last year. Inflation eased to 8.6 percent in February, 7.6 percent in March and 6.6 percent in April but remained elevated over the target range.

The BSP hiked the policy rate by a cumulative 425 basis points to 6.25 percent, more than the adjustments by other emerging market Asian central banks.

“After peaking in January 2023, headline inflation has gradually slowed in recent months, but core inflation has remained elevated, calling for tighter-for-longer rates,” the IMF said.

It said timely imports of cheaper food items and buffer stock releases as envisaged by the Inter-Agency Committee on Inflation and Market Outlook were expected to reduce still high food prices.

AI SUMMIT. LBC Express Inc., Aboitiz Data Innovation and Union Bank of the Philippines sign a tripartite agreement to champion financial sustainability at the inaugural AI Summit in the Philippines. Through this initiative, LBC clients will have access to small business financing from UnionBank to help finance their expansion plans. Signing the agreement are (from left) Aboitiz Data Innovation chief operating officer Guy Sheppard, LBC Express chief financial officer Enrique Rey Jr. and UnionBank executive vice president Roberto Abastillas.