(Bloomberg) -- Philippine central bank Governor Eli Remolona on Tuesday said the monetary authority intends to reduce the key interest rate when conditions are right, as he faced calls from senators to begin easing to aid businesses.
“We don’t want to keep it high for an unnecessarily long time to risk a loss of output,” Remolona said at a Senate hearing on the 2025 budget. “So as soon as we feel that inflation is on the way to our target range, we will have room to ease the policy rate.”
The Bangko Sentral ng Pilipinas chief was responding to a question on the monetary policy direction from Senator Cynthia Villar, who said high interest rates have hit businesses. The BSP is an independent body, but it faces Congress for inquiries including during budget hearings.
“Maybe you should consider bringing down the interest rate already,” said Villar, wife of tycoon Manuel Villar whose businesses include property development and malls. “People are having a hard time, especially the small businessman and even the big businessman.”
At the same hearing, Senator Loren Legarda described the possibility of a rate cut as “good news” that she is anticipating. Senator Joel Villanueva also pressed Remolona on what parameters the BSP is watching to start easing the policy rate, which the central bank head said he will elaborate in an executive session.
The senators’ calls come just days after Economic Planning Secretary Arsenio Balisacan said high interest rates have crimped economic growth. Domestic output grew 6.3% last quarter, but consumption remained tepid.
As early as May, the central bank chief had telegraphed the potential of lowering the benchmark rate from a 17-year-high of 6.5% this month, citing easing price risks. But latest data show that inflation in July accelerated to a nine-month high and breached the 2%-4% target range.
“In monetary policy, we can’t provide a timeline,” Remolona said during the hearing, pointing out that central banks generally give a sense of where they think they might go as well as uncertainties. “But it’s just a sense. It’s not going to be a commitment, because it’s going to be very dependent on the data that we get.”
The central bank’s policymaking Monetary Board will hold its rate-setting meeting on Thursday. Finance Secretary Ralph Recto, who also sits on the policy board, reiterated during the Senate hearing that he sees up to 50 basis points in rate cuts this year on expectations that inflation will slow.
©2024 Bloomberg L.P.
