The central bank of the Philippines raised its key overnight reverse repurchase rate by 25bps to 4.75 percent on November 15th, 2018, as widely expected. It is the fifth straight hike in borrowing costs this year, bringing interest rate to the highest since 2009. The decision was primarily driven by intensifying inflationary pressures, especially after higher wages and transport costs were approved recently. Also, the BSP increased its inflation forecasts for 2018 to 5.3% from 5.2% while cut its forecast for 2019 to 3.5% from 4.3%. For 2020, inflation is seen at 3.3%. The interest rates on the overnight lending and deposit facilities were likewise lifted accordingly. Interest Rate in Philippines averaged 7.90 percent from 1985 until 2018, reaching an all time high of 31 percent in January of 1985 and a record low of 3 percent in June of 2016.
Interest Rate in Philippines is expected to be 5.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Interest Rate in Philippines to stand at 4.50 in 12 months time. In the long-term, the Philippines Interest Rate is projected to trend around 3.75 percent in 2020, according to our econometric models.