The Department of Finance on Friday said domestic inflation had reached its peak as the department welcomed the United States Federal Reserve’s “softer” interest rate hike.
During a meeting with the Makati Business Club, Finance Secretary Benjamin Diokno said the country anticipates a 4.5 percent inflation rate this year.
“I think (the country’s inflation) has peaked, and we will be back to where we’re originally at two to four percent, midpoint three percent, by 2024,” Diokno said.
The Bangko Sentral ng Pilipinas left some leeway in its projection for inflation, estimating that the increase in consumer prices would come in at 7.5 to 8.3 percent in January.
In December 2022, inflation jumped to a 14-year high of 8.1 percent year-on-year.
BSP expects the country’s inflation to slow in the first half of 2023.
The 50-basis point interest rate increase by the US Federal Reserve, then-BSP governor Diokno mentioned, was a “good development.”
This was less than many had predicted, which caused global shares to tremble before the Fed’s decision.
“Well, it’s good news as far as we’re concerned. Instead of 50 bps from 25 bps,” he said.
The Monetary Board will meet to discuss how to adjust its benchmark rate this mid-February.
The BSP’s primary policy rate, which serves as a benchmark for borrowing costs for banks and other financial institutions, is now 5.5 percent.
Euro bond sales up
Meanwhile, Diokno said in the same meeting that the country is considering issuing bonds denominated in the euro due to investor demand.
“When we were in Frankfurt, Germans asked, ‘Why not the Euro?’ So we are considering that. Not now, but I am sure there will be strong demand, especially among the seniors. They have a lot of money,” Diokno said.
“Both (overseas Filipino workers) and Filipino Germans want to invest in our country because the return we offer is high, and it’s tax-free,” he added.
The Bureau of Treasury previously announced a retail Treasury bond sale for April in US dollars. On 7 February, the government will issue five-year retail treasury notes to raise at least P30 billion for debt refinancing.
“I think the rates are coming down because of renewed confidence. Let’s see what the market will bear. We floated; the most recent was the $3 billion that was well received, often over ang demand. We expect the same,” he said.