Analysts Anticipate Limited Impact Of Rate Hikes On Inflation

Analysts suggest that further rate hikes by the Bangko Sentral ng Pilipinas (BSP) may have a limited impact on inflation and could potentially slow economic growth.

Last week, National Economic and Development Authority Secretary Arsenio M. Balisacan warned that further monetary tightening could negatively impact the economy and consumers who are already grappling with high inflation.

Nicholas Antonio T. Mapa, a senior economist at ING Bank N.V. Manila, believes that another rate hike at this stage is unlikely to substantially affect inflation.

This comes in response to a statement by BSP Governor Eli M. Remolona, Jr., who mentioned that he is not ruling out a 25-basis-point (bp) increase at the Monetary Board's next policy review on November 16.

The BSP has maintained the key interest rate at a near 16-year high of 6.25% in its last four meetings. Another 25-bp rate hike would raise the benchmark rate to 6.5%.

Last week, National Economic and Development Authority Secretary Arsenio M. Balisacan warned that further monetary tightening could negatively impact the economy and consumers who are already grappling with high inflation.

Mapa pointed out that increased borrowing costs would influence bank lending, which is closely connected to capital formation and gross domestic product (GDP) expansion.

He stated, "We believe that the net result of additional tightening would be significantly slower growth, with only a modest impact on inflation, but only after growth declines to multi-year lows."

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