The Bangko Sentral ng Pilipinas (BSP) interest rate hike is not an effective solution to curb the inflation in the country, according to an economist.

The BSP on Thursday decided to continue with its policy tightening, bringing key policy rates to levels last seen in 2007.

“Tantanan na ang pagtataas ng interest rate dahil ang nangyari sa atin pinapakita lang na ang interest rate ay hindi epektibong instrumento para pigilan ang pagtaas ng presyo ng mga bilihin,” economist and Pamantasan ng Lungsod ng Maynila president Emmanuel Leyco said on Sandra Aguinaldo’s “24 Oras” report on Friday.

Leyco said the increasing prices of goods in the country are not demand driven but due to the lack of supply.

“Yung pagtataas ng mga presyo ay hindi dahil sa maraming namimili, maraming pera ang mga tao, kung hindi kakaunti ang nabibili ng mga mamamayan lalong lalo na sa pagkain so kung ito ay production induced na inflation maski itaas ang interest rate hindi ito magiging epektibo,” he said.

He said ensuring sufficient supply of goods should be immediately addressed.

“Sa palagay ko buong taon ay patuloy na tataas ang presyo ng mga bilihin kung hindi matutugunan,” he said.

The BSP said it expects that the prices of goods will increase to 6.1% this year.  It surpassed the target of 2 to 4% which can possibly be achieved in 2024.

“Global food [and] market uncertainties, continued domestic shortages in key food items, additional fare hikes with elevated oil prices, and the higher expected wage adjustments in 2023,” BSP Governor Felipe Medalla said.

Medalla also raised the need "to mitigate the impact of persistent supply side pressures on food prices, including creating positive measures and significant progress to boost productivity."

Medalla said the 50-basis-point adjustments would take effect on Friday, February 17, bringing the overnight reverse repurchase rate to 6.0%, the overnight deposit facility rate to 5.5%, and the overnight lending facility rate to 6.5%.

The country's gross domestic product (GDP) grew 7.2% in the fourth quarter of 2022, bringing the full-year economic growth to 7.6%.—Richa Noriega/LDF, GMA Integrated News

This article BSP interest rate hikes not curbing inflation, says economist was originally published in GMA News Online.

2023-02-17T17:19:33Z dg43tfdfdgfd