The Philippine central bank will exercise caution against “too much” monetary tightening to avoid crimping economic growth, according to Governor Eli Remolona.

“If we are going to hike, we have to be very careful not to hike too much,” Remolona said at a briefing in Manila Friday, when asked if the economy can handle more tightening on top of the 425-basis points of increases since last year.

Sitting alongside Finance Secretary Benjamin Diokno during the rare media engagement, Remolona said July inflation data that showed price gains at a 16-month low was “very good.” Government measures to ensure sufficient food supply also lessen the need for monetary policy interventions, he said.

The Philippines is weighing the need for more rate hikes as risks to inflation mount. A potential drought with the onset of the El Niño weather pattern, higher minimum wages for some workers and costlier transport could possibly fuel price gains.

Still, policymakers will be careful not to derail growth, which economists expect will be the quickest pace in Southeast Asia this year.

The potential impact of El Niño to rice producers like Vietnam was “worrisome,” Remolona said. Still, price gains are likely to fall below the 2%-to-4% goal early next year and the aim was “to get to the target range without overshooting too much,” he said.

In his first weeks after taking the helm of the central bank in early July, Remolona repeatedly signaled that the Bangko Sentral ng Pilipinas was ready to resume policy rate increases, if needed. He has also described the monetary authority as “structurally hawkish.”

During Friday’s briefing, the BSP governor said this hawkish stance has helped support the peso even after the US Federal Reserve raised interest rates last month.

“We found that when we were kind of hawkish in our forward guidance, the peso actually got stronger, even with narrowing differential,” he said.

The peso is little changed this year, after slumping more than 8% last year.

--With assistance from Ditas Lopez.