Interest rates already at their peak

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The benchmark interest rate in the Philippines is already at its peak, with the central bank expected to pause as inflation is seen slowing down and economic growth rebounding.

Finance Secretary Benjamin Diokno said he expects the Bangko Sentral ng Pilipinas (BSP) to keep rates unchanged in its scheduled meeting next week.

Diokno was the BSP governor during the Duterte administration and currently sits on the Monetary Board.

'I think we have reached the highest level in interest rates,' Diokno told reporters on the sidelines of the bell ringing ceremony for the retail dollar bond issuance yesterday.

'The US Federal Reserve, ECB (European Central Bank) have paused already. And given the decline in inflation, there's no more justification for higher interest rates,' he said.

On Oct. 26, the BSP took an off-cycle action by hiking rates ahead of its regular schedule on Nov. 16.

As such, the BSP delivered a 25-basis-point hike, bringing the benchmark rate to 6.50 percent, the highest in 16 years.

While some economists are not dismissing the possibility that the BSP could further tighten, Diokno believes otherwise.

'I think the BSP will hold rates next week. That's why (Governor) Eli (Remolona) already decided for an off-cycle,' Diokno said.

'I think we have reached the maximum rate. Our prospects for next year are good, except if the war worsens, although the impact is remote. Oil prices are falling and the peso is strengthening,' he said.

Diokno is also banking on better inflation and gross domestic product (GDP) data, which will be released this week.

He said inflation likely cooled last month while third quarter GDP grew at a faster pace.

'Definitely, it will be better than the second quarter because we ramped up our infrastructure,' Diokno said.

For inflation, the BSP forecasts that the headline rate would have settled within 5.1 to 5.9 percent in October from 6.1 percent in September on the back of lower prices of rice, meat and vegetables along with the reduction in the prices of petroleum products, which contributed to downward price pressures.

For GDP, market consensus is for the economy to have grown 4.9 percent in the third quarter, faster than the 4.3 percent in the previous quarter.

For the rest of the year, however, Diokno said the economy may reach only the lower end of the six to seven percent target.