Philippine central bank assessing slower growth's impact on inflation

What happened

The Bangko Sentral ng Pilipinas said it is assessing how slower economic growth affects inflation, while remaining committed to returning inflation to target and supporting sustainable growth. The economy grew 2.1% in July-September, its fifth consecutive quarter of slowing, and the central bank raised its policy rate to 5.5% in October.

Confirmed

Global impact / market context

The central bank is weighing weak domestic demand against inflation risks. If it tightens policy further to contain price pressures, borrowing costs could rise for households and businesses, potentially weighing on spending and company revenue; easing instead could risk inflation expectations becoming less stable.

Analyst inference

Slower growth and weak domestic demand complicate the central bank’s effort to control inflation while supporting sustainable growth. If it raises interest rates further, borrowing costs for households and businesses could rise, potentially restraining spending and investment; holding back could leave inflation pressures less contained.

Analyst inference

What to watch

1. Watch for the central bank’s next statements on inflation and growth, especially whether it signals another rate increase or gives greater weight to weak domestic demand. Analyst inference
2. Track inflation expectations and the effects of global supply shocks, which the bank says are beyond its control and may complicate its effort to restore price stability. Analyst inference
3. Compare later growth results with the government’s 3.5% to 4.5% full-year target; continued weakness could increase pressure to balance growth support against inflation control. Analyst inference

Evidence

• Original source link unavailable