THE Philippine central bank would consider bigger key rate increases to support the peso and amid faster inflation, according to its new chief.

“The key really is what’s the momentum of inflation,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla told reporters on Wednesday night.

Still, he expects consumer spending to boost economic growth in the second quarter, citing the influx of people at malls.

“People are actually almost unafraid of COVID,” he said. “To the extent the rising cases do not result in clogging the hospitals, then we’ll be fine.”

Inflation likely quickened to 5.7-6.5% in June amid spiraling oil and food prices, higher electricity rates and a weaker peso, his predecessor Benjamin E. Diokno said on Thursday.

This is well above the central bank’s 2-4% target this year.

“The continued increase in domestic oil prices, upward adjustment in electricity rates, higher prices of key food items and peso depreciation are the primary sources of inflationary pressures during the month,” Mr. Diokno told reporters in a Viber message. “These could be offset in part by lower prices of LPG and fish.”

“The BSP will continue to monitor closely emerging price developments to enable timely intervention to arrest the emergence of further second-round effects, consistent with its mandate of price and financial stability,” he added.

The low end of the June inflation forecast will be the fastest since 6.1% in November 2018, while the high end will be the quickest since 6.9% in October 2018, according to BSP data.

Inflation was 5.4% in May, the fastest in more than three-and-a-half years. The government will release inflation data on July 5.

Pump prices of gasoline, diesel and kerosene have jumped by P30, P45.90 and P39.75 a liter as of June 28, according to data from the Energy department.

Manila Electric Co. (Meralco), which distributes power to the capital region, raised its overall rate by P0.3982 a kilowatt-hour (kWh) to P10.4612 a kWh in June from P10.0630 a kWh a month earlier.

The peso closed at P55.06 a dollar on Wednesday, its weakest level since it closed at P55.08 on Oct. 27, 2005. It slightly recovered to P54.975 on Thursday.

The US Federal Reserve hiked its benchmark policy rate by 75 basis points (bps) and has signaled more increases at its future meetings to cool down inflation.

The US consumer price index rose by 8.6% in May, the fastest since December 1981. This caused renewed concerns that the Fed’s aggressive action could dampen growth prospects for the world’s largest economy.

The Philippine central bank raised its key interest rate by 25 bps to 2.5% for a second straight meeting on June 23 to cool inflation.

It also raised its average inflation forecast for this year to 5% from 4.6% and to 4.2% from 3.9% next year. Average inflation is expected to decline to 3.3% in 2024.

The Monetary Board will hold its next rate-setting meeting on Aug. 18.