BSP hints at possible August interest rate hike

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Metro Manila (CNN Philippines, July 20) — The Monetary Board, the policy making arm of the Bangko Sentral ng Pilipinas, may raise borrowing interest rates next month in a bid to tame inflation, the central bank's top executives said Friday.

The timeline is earlier than economic analysts' forecast of when interest rates will be raised anew.

"The Governor has given quite a strong message that the BSP is ready to undertake whatever monetary policy action is necessary, and if warranted a strong monetary response, a follow through this August 9th meeting of the board," BSP assistant governor for monetary policy Francisco Dakila told CNN Philippines' Business Roundup.

In a press conference also on Friday, BSP Governor Nestor Espenilla said that it's possible for inflation to rise higher than the 5.2 percent reported in June.

"We could still see potential peaking of inflation along the third quarter of this year," Espenilla said, adding that inflation could fall back into the government's 3 to 4 percent target rate in 2019.

Espenilla added that the BSP has continually been acting on inflation, and has been in a "tightening cycle" since April, when the Monetary Board raised interest rates from 3.0 percent to 3.25 percent. The board again raised interest rates to 3.5 percent in May.

Raising borrowing rates is one of the policy measures that can be implemented to tame inflation.

"We would continue to stay vigilant and monitor what goes to the data in terms of the necessary follow through action," Espenilla said.

The Department of Finance, in its latest economic bulletin, expects inflation in July to be at 5.3 percent.