Higher-for-longer interest rates seen

A New York-based think tank sees the need for the Bangko Sentral ng Pilipinas (BSP) to keep high interest rates until 2025 as inflation remains stubborn and above target.

- LAWRENCE AGCAOILI

Former BSP deputy governor Diwa Guinigundo, country analyst for the Philippines at GlobalSource Partners, in a commentary titled "Philippine Macroeconomy: Not Exactly a Goldilocks Scenario," said the central bank's Monetary Board should remain hawkish in both its policy moves and pronouncements.

"The forecasts indicate above-target inflation for this year, and we agree as to its likelihood, and the next. For 2025, we argue for sustained tightening for at least two reasons," Guinigundo said.

He pointed out that inflation forecasts are quite close to the upper end of the inflation target, while credit and economic growth remain intact.

"There is enough space for monetary cautiousness. The biggest risk is the inability of those non-monetary interventions to make a difference," he said.

Based on the latest BSP forecasts for this year, inflation is expected to remain elevated at six percent, beyond the two to four percent inflation target.