THERE’s a ‘slim chance’ for the central bank to aggressively raise the key interest rate at its upcoming monetary policy meeting in August amid new upward pressures to inflation.
That’s what Bangko Sentral ng Pilipinas Governor Eli M. Remolona Jr. told reporters when asked on the possibility of a 50-basis points hike after the Monetary Board of the BSP convenes in its August 27 policy meeting.
‘May chance naman. Pero baka maliit na chance,’ Remolona said. ‘Malaking volatility ‘yung last week. Maraming nangyari last week, lumakas ‘yung dollar ng husto last week.’
The central bank chief also told reporters that the BSP remains pensive given the recent economic developments. The latter includes the historic wage hike for workers in the National Capital Region (NCR) and the 12.5-percent tariffs slapped by the United States on Philippine exports, among others.
‘Lahat ‘yun sinasaksak namin sa mga model namin. We’re still refining because the models don’t necessarily take account of the uncertainty so we’re still calibrating that. But the usual price of rice goes up, the price of oil goes up-those things in themselves you can just stick them into models,’ Remolona added.
However, what the central bank still has to integrate into its models are: the ‘associated uncertainty and associated effect on confidence.’
Remolona noted that the central bank is still running its estimates on the size of the impact on inflation of the recently-announced P85 daily minimum wage hike in NCR.
He earlier told reporters that the recent wage adjustment may have ‘significant’ impact on inflation but the ‘sensitivities’ of this adjustment may have to be further analysed.
‘We’ll have to do the numbers. Unusual ito, eh,’ Remolona told reporters in an interview on July 3.
During that interview, however, he said the recent wage adjustment ‘will probably not’ lead to a jumbo or 50-basis-points hike.
The central bank’s annual minimum wage increase assumption for 2026 was way below the actual minimum wage hike or the P85 approved by the NCR wage board for this year, the BSP’s latest monetary policy report showed.
‘The assumed annual minimum wage increase is 6.7 percent for 2026, in line with the previous year’s wage adjustment in the National Capital Region,’ the BSP said in its ‘Monetary Policy Report.’
The wage hike approved by the NCR wage board is equivalent to a 12.23-percent expansion of worker’s pockets.
Minimal intervention
MEANWHILE, Remolona also revealed that the BSP minimally intervened in the foreign exchange market last week when the peso continued to weaken against the dollar. He emphasized, however, that the central bank usually limits its interventions, especially amid a strong greenback.
‘May konti-konti lang,’ Remolona said when asked if the central bank intervened in the market last week.
Last week, the Philippine peso slumped anew to P61.75 against the dollar on the back of a re-escalation of tensions between the United States and Iran which led to elevated crude oil prices.
Just two days later, the Office of the United States Trade Representative (USTR) announced that failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor would warrant a 10-percent or 12.5-percent tariff on 60 trading partners, subject to ‘certain product exemptions.’
Washington’s announcement, thus, added another layer to global economic uncertainties-fueling the demand for safe-haven dollar assets and dragging the Philippine peso to a new record low of P61.847 against the greenback last Friday.
‘When it’s a strong dollar, we limit intervention to just maintain orderly markets,’ Remolona explained. ‘Because if we intervene against a strong dollar, we’re just helping the rest of the world get their dollars. Binibigyan natin sila ng dollars. Wala tayong laban sa ganoon. Uubusin lang natin ang dollars natin.’
Data from the Bankers Association of the Philippines (BAP) showed that the Philippine peso closed at P61.614 against the dollar last Tuesday, 6.1 centavos stronger than its previous finish of P61.675 on Monday.