Inflation remains the Philippine central bank's top priority and monetary policy needs to be appropriately tight to ensure the pace of inflation will ease to within government targets, the central bank chief said on Sunday.
Domestic demand is also expected to pick up and support economic growth once inflation stabilises, Governor Amando Tetangco told reporters in an e-mail message.
"Fighting inflation is our top priority," Tetangco said. "As I have said before, price stability is essential to long-term sustainable growth." When asked if the central bank was ready to keep policy rates steady at its next meeting after three rate hikes in the past three months, Tetangco said: "Monetary policy needs to be appropriately tight to stabilise inflation to within the target range over the policy horizon, and to help manage inflation expectations." "We will continue to look at the balance of risks to the inflation outlook, and take into account the impact of past policy actions."
On Thursday, the central bank raised interest rates by a quarter percentage point, tightening policy as expected for a third policy meeting in a row as inflation reached 17-year highs and despite data showing the economy's second quarter growth of 4.6 percent was the slowest annual pace in about three years. Socio-economic planning chief Ralph Recto said last week the government's economic growth target of 5.5 to 6.4 percent this year would be a tough goal but said government spending in the second half may offset slowing domestic consumption arising from high food and fuel prices.
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