MANILA, Philippines — The impact of the high-for-now interest rate environment has not yet run its course, according to the inter-agency Financial Stability Coordination Council.

FSCC chairman and Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said the body’s systemic risk review highlighted that the growth prospects of the Philippines’ major trading partners are expected to diverge.

As market rates have swung from a lower-for-longer to a high-for-now environment, the FSCC said its full impact may not have yet run its full course.

“In managing systemic risks, we prepare for viable possibilities rather than forecast the most likely outcome. And the FSCC does exactly that in this meeting,” Remolona said.

The FSCC meets quarterly, but more frequent meetings have been convened when market conditions warrant.

According to the FSCC, it approved a range of actions that will enhance the resilience of the country’s financial system and strengthen its ability to absorb risks.

The actions cover a broad range from communication to the capital and contingent markets as well as having in place both the right tools and better data to pre-emptively manage possible contagion risks.

Remolona noted that there are several positives marking the local financial market.

These include the expanding economy, falling headline inflation, increasing employment, and the absence of immediate signs of sector-wide pressures among corporates.

“While the high-level indicators are notable, there are many developments that we should still monitor. This is where systemic risk surveillance is critical because we need to assess if and how changing conditions in the global and regional markets mesh with our own domestic situation,” the BSP chief said.

Likewise, the FSCC observed that global growth prospects are more positive today than several months ago, but there are still evident pressures from the advanced economies and even from within Asia.

The BSP has aggressively raised interest rates by 425 basis points during a tightening cycle stretching from May last year to March this year to tame inflation and stabilize the peso.

The inflation downtrend and stable local currency allowed the BSP’s Monetary Board to maintain a hawkish pause by keeping interest rates untouched since May this year.

SBC economist for ASEAN Aris Dacanay said they believe the central bank would keep the benchmark interest rate steady at 6.25 percent until the end of the year.

“We continue to expect the BSP to keep its policy rate unchanged at 6.25 percent in the Sept. 21 meeting but acknowledge that it’s a tough call,” Dacanay said.

Inflation accelerated to 5.3 percent in August after decelerating for six straight months to 4.7 percent in July from a peak of 8.7 percent last January.

“Nonetheless, given how much of a staple rice is in the Filipino household diet, rice prices may potentially kick start a series of second-round effects. Pre-empting this risk will therefore be a policy call for the BSP in the upcoming Monetary Board meeting,” Dacanay added.

Jun Neri, lead economist at Ayala-led Bank of the Philippine Islands, reiterated that rate cuts are premature at this point, considering the possibility of inflation could remain above the BSP’s two to four percent target range in the next six months.

Neri added that inflation has been above the target of the BSP for almost two years already.