Philippine Central Bank Raises Rate By 75 Bps
The Philippine central bank raised its benchmark rate by 75 basis points, as widely anticipated, to support the weakening peso and fight inflation.
The Monetary Board hiked its benchmark overnight reverse repurchase facility rate by 75 basis points to 5.00 percent.
Accordingly, the interest rates on the overnight deposit and lending facilities will be set to 4.5 percent and 5.5 percent, respectively.
The central bank has raised the benchmark rate by a cumulative 300 basis points in the current tightening cycle that began in May.
The board said there is need for aggressive monetary policy action to safeguard price stability given the increased likelihood of further second-round effects, persistent inflationary pressures, and the predominance of upside risks to the inflation outlook.
In deciding to hike the interest rate, the board noted that core inflation increased sharply in October due to the stronger pass-through of elevated food and energy prices as well as demand-side impulses on inflation.
Further, the bank observed that the risks to the inflation outlook lean strongly toward the upside until 2023 while remaining broadly balanced in 2024.
In October, consumer price inflation accelerated to 7.7 percent, the strongest since December 2008, from 6.9 percent in September.
“Looking ahead, the BSP will continue to take all necessary action to bring inflation back within the target band over the medium term, in keeping with its primary mandate to sustain price and financial stability,” the bank said.
Further tightening is likely in the near term, but with inflation having probably peaked, headwinds to the recovery mounting and the Fed’s own tightening cycle likely to come to an end soon, the BSP will stop raising rates early next year, said Capital Economics’ economist Gareth Leather.
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