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Friday, March 29, 2024

BSP hikes interest rates for the 5th time this year

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The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, on Thursday raised for the fifth time this year the benchmark interest rates by 25 basis points to 4.75 percent to further temper higher inflation rate.

The rate hike has brought the total increase in the policy rates this year to 175 basis points since May 2018. The interest rates on the overnight lending and deposit facilities were raised accordingly.

Bangko Sentral Deputy Governor Almasara Cyd Tuano-Amador said in a briefing late Thursday afternoon the upside risks to inflation outlook remained amid the measures implemented by the government to make sure consumer prices were in check.

“While the latest inflation forecasts show inflation settling within the target band of 2 to 4 percent in 2019 and 2020, after considering the impact of non-monetary measures, including the rice tariffication bill and the suspension of the oil excise tax, the board raised the policy rate by 25 basis points given the upside risks to the inflation outlook… ,” Amador said.

The board also increased the average inflation forecast this year to 5.3 percent from the 5.2-percent estimate made in the September policy meeting. The forecast for 2019 was reduced to 3.5 percent from 4.3 percent, while that of 2020 was raised to 3.3 percent from 3.2 percent.

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The Monetary Board is set to hold its last policy meeting for the year next month.

Amador said the board believed the prospects for the domestic economy remained generally favorable and allowed some scope for a measured adjustment in the policy rate to rein in inflation expectations and pre-empt further second-round effects.

“The board deemed it necessary to respond with proactive policy action to help temper the risks to the inflation outlook, including those emanating from the continued  uncertainty in the external environment amid tighter global financial conditions and trade tensions among major economies,” Amador said.

Inflation in October remained at a nine-year high of 6.7 percent, the same rate posted a month ago but significantly faster than 3.1 percent a year ago, driven mainly by increases in the prices of fuel, transport and the impact of recent typhoon Ompong in northern Luzon, the Philippine Statistics Authority said.

This brought inflation rate in the first 10 months of the year to 5.13 percent, well beyond the 2 percent to 4 percent target range set earlier by the government.

Bangko Sentral Governor Nestor Espenilla Jr., however, said the October inflation data supported its view that inflation pressures were finally moderating.

Earlier, Finance Secretary Carlos Dominguez III said the Duterte administration was doing its best to tame inflation with an array of measures in place to streamline imports of agricultural goods and speed up the delivery of food items to the retail market in order to check rising commodity prices.

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