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THE Bangko Sentral ng Pilipinas (BSP) said Tuesday that it may raise
its key interest rates should persistent high prices risk breaching
next year’s inflation target.
BSP Gov. Amando M. Tetangco Jr. said the
inflation target would likely be exceeded this year because of
supply-side shocks on higher rice and oil prices. The central bank
set a 3-percent to 5-percent target range for this year.
“If the forecasts show that there’s a risk
to the inflation target for 2009, given the lag in monetary policy,
we’re really looking at 2009. If there’s a risk to that we will
act preemptively to make sure that we meet the inflation target for
next year,” Tetangco said in an interview over Bloomberg
television.
Last month, inflation jumped to a three-year
high of 8.3 percent, breaching the BSP’s forecast for the month.
Food prices are the most immediate threat to
inflation right now, Tetangco said, adding, “We are also concerned
about a possible wage-price spiral because there have been demands
for wage increases from various labor sectors.”
But the central bank earlier said the approved
wage adjustment is in line with its assumption, and so unlikely to
contribute to higher inflation.
“We don’t expect additional or incremental
inflationary pressure from that,” Tetangco said.
The central bank chief said the BSP continues to
monitor inflation developments and assess the outlook every six
weeks. The Monetary Board is set to meet next week to decide on
whether it should alter its policy stance.
The BSP’s overnight borrowing and lending
rates stand at 5 percent and 7 percent, respectively, after the
central bank broke off from the US Federal Reserve’s loosening
bias a few months ago on account of rising domestic prices.
At the Philippines Dealing System, the peso
closed at 43.75 to the greenback, weaker than Monday’s finish of
43.58. Total volume traded reached $595.5 million from the previous
day’s $405 million.
Tuesday’s close was the weakest since November
last year.
A local trader said the BSP is trying to temper
the sudden depreciation of the peso, selling around $200 million in
the process.
Metropolitan Bank and Trust Co. said the local
currency will continue to depreciate as inflationary and fiscal
concerns weigh on investor sentiments.
-- Chino S. Leyco
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