No Need for Preemptive Philippine Rate Hike, Finance Chief Says

A vendor selling cigarettes waits for customers near a church at Quiapo Market in Manila. (Photo: Getty Images)

By Siegfrid Alegado and Cecilia Yap

The Philippines doesn’t need to raise interest rates at this point, Finance Secretary Carlos Dominguez said, defying calls from a growing number of economists who say the central bank is moving too slowly to act against inflation risks.

“To be preemptive, which is to take action before it’s needed, I don’t think that’s required at the moment,” Dominguez, who sits on the central bank’s seven-member board, said in an interview in Manila on Monday. “Rate-wise, I think the Monetary Board is on the right track and we keep an open mind.”

Bangko Sentral ng Pilipinas, led by Governor  Nestor Espenilla, has so far resisted pressure to tighten monetary policy even though inflation is set to breach the central bank’s 2 percent to 4 percent target band this year and the economy is showing signs of overheating. A majority of economists surveyed by Bloomberg predict the benchmark rate will be raised from a record-low 3 percent in March.

Inflation probably accelerated to 4.1 percent in February from 4 percent in the previous month, according to the median estimate of 15 economists surveyed by Bloomberg using the 2006 base year. The statistics office will release two sets of data on Tuesday, one calculated with a 2006 base year and another using 2012.

Dominguez said he “doesn’t see prices running away” and inflation will probably ease because of tougher monitoring of retailers who may have artificially pushed up prices. Policy makers also look at other factors when deciding on rates, including the pace of tightening in the U.S., he said.

Weak Peso

The finance secretary brushed off concern about a weaker currency, saying it helps to boost the amount of money that Filipinos living abroad can send to their families back home, while increasing the competitiveness of exports and the outsourcing industry.

The Philippine peso is the worst performing currency in emerging markets after the Argentine peso this year, losing about 4 percent against the dollar.

The Philippine economy is growing more than 6 percent annually, among the world’s fastest. While that’s mainly been driven by strong domestic demand, rising trade protectionism particularly from the U.S. is a worry for authorities, said Dominguez.

Read: Trump Trade Crackdown Shows ‘America First’ Happening at Last

The government will look into its effect on trade and investment, Dominguez said. “It can’t be good. This is really dangerous,” he said.


To contact the reporters on this story: Siegfrid Alegado in Manila at; Cecilia Yap in Manila at

To contact the editors responsible for this story: Nasreen Seria at; Karl Lester M. Yap

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