Key interest rates up another half percent
TIZIANA CELINE PIATOS
The Manila Times
MONETARY authorities raised key interest rates by another 50 basis points (bps) on Thursday, citing price pressures that also prompted adjustments to inflation forecasts. The move pushed the Bangko Sentral ng Pilipinas’ (BSP) policy or overnight repurchase rate to 4.25 percent and its overnight deposit and lending rates to 3.75 percent and 4.75 percent, respectively. Key rates have now been raised five times or by 225 bps this year, starting with successive 25-bps adjustments in May and June, a surprise off-cycle 75bps hike in July, and 50 bps last month in a bid to contain surging inflation. While the rise in consumer prices slowed to 6.3 percent in August from 6.4 percent a month earlier, it remained well above the government’s 2.0- to 4.0-percent target for the year. During Thursday’s meeting, the Monetary Board pointed to the impact of recent wage and fare hikes, higher global non-oil prices, possible further fare increases, bad weather and a sharp rise in sugar prices as pressuring the outlook. It raised the inflation forecast for 2022 to 5.6 percent, from 5.4 percent in August and that for 2023 to 4.1 percent from 4.0 percent. The 2024 forecast was trimmed to 3.0 percent from 3.2 percent. “Given elevated uncertainty and the predominance of upside risks to the inflation environment, the Monetary Board recognized the need for followthrough action to anchor inflation expectations and prevent price pressures from becoming further entrenched,” the BSP said in a statement. Ahead of the rate hike announcement, central bank Governor Felipe Medalla said the interest rate environment still had some room for adjustment. “Despite the normalization of policy settings, our policy rate is still accommodative,” he said. The BSP indicated that further policy interventions could be made, raising the prospect of more rate adjustments down the road as the US Federal Reserve on Wednesday delivered another massive 75-bps rate hike. The US central bank’s tightening has led to a stronger dollar and subsequently a weaker peso. The currency, which fell to P58:$1 for the first time on Wednesday, closed at a new record low of P58.49 to the greenback.