DOF: Loan interest rates unlikely to increase soon

Filipinos looking to take out loans for major expenses can find some relief, as the Department of Finance (DOF) expects that interest rates are likely to remain steady or even decrease in the latter half of the year.

On the sidelines of the Bureau of Internal Revenue’s National Tax Campaign Kick-off event, Finance Secretary Ralph G. Recto said he does not expect the Bangko Sentral ng Pilipinas (BSP) will raise interest rates in the near future.

Recto, the government’s representative to the BSP’s Monetary Board (MB), explained that an increase in interest rates is unnecessary due to the easing inflation, or consumer prices.

The central bank’s MB, which will meet on Feb. 15, is responsible for controlling the country’s money supply and interest rates to maintain stable prices and support economic growth.

“I don’t expect a future rate hike because inflation is going down and it seems like it’s going down globally also,” Recto told reporters.

In January, the inflation rate dropped to 2.8 percent, marking its slowest pace in more than three years, from 3.9 percent in December.

The consistent decline in headline inflation has kept the pace of price increases within the government’s target range of 2.0 percent to 4.0 percent for the second consecutive month.

“I think our policy rates today are high enough,” the DOF chief said.

To control high inflation, the BSP has raised policy rates by a total of 450 basis points since May 2022, bringing the benchmark policy rate to 6.5 percent.

“I expect maybe in the second half, there’s a possibility na bumaba ‘yan [it would go down],” Recto said.

However, Recto also said that the central bank is likely to consider the actions of the US Federal Reserve as a key factor in determining the timing of any potential rate cut.

“I think the key is what happens with the Fed – are they [going to] start reducing rates? If they do, then possibly we can start reducing rates. I think the Fed needs to cut first then we take a look at our own data,” he added. — Chino S. Leyco

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Credit belongs to: www.mb.com.ph