By Keisha B. Ta-asan
THE BANGKO SENTRAL ng Pilipinas (BSP) on Thursday raised its key interest rate for a second straight meeting to cool inflation, which is now seen to quicken to 5% this year.
The central bank also continued to signal gradual policy normalization despite the Philippine peso weakening against the US dollar to a more than 16-year low.
The Monetary Board on Thursday increased the benchmark rate by 25 basis points (bps) to 2.5%, as expected by nine out of 16 analysts in a BusinessWorld poll last week.
Interest rates on the overnight deposit and lending facilities were also hiked by 25 bps to 2% and 3%, respectively.
“The Monetary Board believes that a follow-through increase in the policy rate enables the BSP to withdraw its stimulus measures while safeguarding macroeconomic stability amid rising global commodity prices and strong external headwinds to domestic economic growth,” BSP Governor Benjamin E. Diokno said during a media briefing.
Mr. Diokno said that upside risks continue to cloud the inflation outlook with pressures arising from the “potential impact of higher global non-oil prices, the continued shortage in domestic fish supply, as well as pending petitions for transport fare hikes due to elevated oil prices.”
He said the BSP raised its average inflation forecast for this year to 5%, from 4.6% previously, exceeding its 2%-4% target band.
For 2023, the BSP’s inflation forecast was revised upward to 4.2% from 3.9% previously. Average inflation is expected to decline to 3.3% in 2024.
“In line with the ongoing normalization of its monetary policy settings, the BSP is prepared to take all necessary policy action to bring inflation toward a target-consistent path over the medium term and deliver on its primary mandate of price stability,” Mr. Diokno said.
After the BSP’s announcement, the Philippine peso sank to P54.70 versus the US dollar, the peso’s worst finish since Nov. 21. 2005’s P54.74.
The Philippine Stock…
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