Inflation in January hit a 14-year high of 8.7%, prompting the Bangko Sentral ng Pilipinas (BSP) to say it was likely to raise its benchmark interest rate one more time this year, after having hiked it by 50 basis points on Feb. 16, Reuters reports.
The news agency reported BSP Governor Felipe Medalla saying that in the “worst-case scenario” of inflation rising above 9%, interest rates might be hiked by 25 or 50 basis points depending on the latest economic data.
While the Philippine Statistics Authority (PSA) reported last week that the headline inflation rate in February has marginally slowed down to 8.6%, analysts are closely watching the BSP’s next move in its next rate-setting meeting on March 23.
Some fear that despite the easing of the inflation rate, a rate hike by the US Federal Reserve in the wake of the recent Silicon Valley Bank crisis could trigger a similar move by the BSP.
Reuters reports that the BSP has raised rates eight times for a total of 400 basis points since last year, but that Medalla expects inflation to return to within a target range by the fourth quarter of this year.
Meantime, real estate services firm Cushman & Wakefield reports that “whilst the effect of policy rate hikes will not immediately translate to increases in mortgage rates in the short term, the demand for the midmarket housing property segment will likely take a hit once it takes effect in the near term, especially with a high inflation rate environment that dampens consumers’ purchasing power.”