FX.co ★ Philippines Unlikely To Tighten Policy Further, Central Bank Chief Says

Philippine Central Bank Governor, Eli Remolona, indicated on Wednesday that it is unlikely for the central bank to reintroduce a tightening cycle, given that the inflation rate is projected to stay within the government's target for the current year. He clarified that additional tightening is improbable, but future actions will depend on the forthcoming data.

Remolona disclosed that it is also uncertain whether the central bank could reduce interest rates soon, given inflation’s potential increase due to factors such as increased rice prices.

The Central Bank’s recently published official data show that the Philippines' headline inflation rate increased from 2.8 percent in January to 3.4 percent in February; this figures sits within the Bank's predicted range of 2.8-3.6 percent for February.

Consequently, the year-to-date average inflation rate of 3.1 percent aligns with the government's inflation target of 3.0 percent +1.0 percentage point.

Wednesday’s announcement from the Central Bank aligns the latest inflation rate with the Bank's expectations, suggesting that inflation will probably remain within the target range in the first quarter. However, the bank noted, inflation might slightly exceed the target range in the second quarter due to the negative impact of El Nino weather conditions on agricultural production and positive base effects.

Moving forward, the Central Bank said it would keep monitoring factors that affect the outlook for inflation and growth, adhering to its data-dependent approach to monetary policy.

For the third consecutive time, the Central Bank's Monetary Board chose to hold key policy rates during its February policy meeting and lowered its inflation outlook for 2024.