Philippines Hikes Key Interest Rate for 4th Consecutive Time

The central bank of Philippines raised its key overnight reverse repurchase rate by 50bps to 4.5 percent on September 27th, 2018, in line with market expectations. It was the fourth straight hike in borrowing costs and the second consecutive 50 bps rate increase in a decade, as the central bank tries to contain inflationary pressures and support the falling currency. The interest rates on the overnight lending and deposit facilities were likewise raised accordingly.

In August, the inflation jumped to 6.4 percent from 5.7 percent in the previous month, remaining at the highest level since March of 2009.

Excerpts from the Statement by the Bangko Sentral NG Pilipina:

“The Monetary Board recognized that a further tightening of monetary policy was warranted by persistent signs of sustained and broadening price pressures. Latest baseline forecasts have shifted higher for both 2018 and 2019, with risks to the outlook still leaning toward the upside. With supply-side forces expected to continue to drive inflation in the coming months, inflation expectations have remained elevated amid indications of second-round effects. Meanwhile, domestic demand conditions have generally held firm, even as the previous monetary policy responses continue to work their way through the economy. 

The Monetary Board, therefore, decided to raise the BSP policy interest rate anew to further anchor inflation expectations and to safeguard the inflation target over the policy horizon. The Monetary Board believed that a tighter monetary policy stance will help steer inflation toward a target-consistent path over the medium term by reducing further risks to the inflation outlook, including those emanating from exchange rate volatility given the continued uncertainty in the external environment amid geopolitical tensions and the normalization of monetary policy in advanced economies.

At the same time, the Monetary Board emphasized the need for timely and appropriate non-monetary measures that will further mitigate the impact of supply-side factors on inflation, including rice tariffication. The BSP reassures the public of its strong commitment to take all necessary policy actions to address the threat of high inflation and deliver on its primary mandate of price stability.”

Philippines Hikes Key Interest Rate for 4th Consecutive Time

Bangko Sentral NG Pilipinas | Gabriela Costa |
9/27/2018 9:22:22 AM