Philippine central bank raises policy rate by 25 basis points
An aerial view shows the Ortigas business district in Pasig City, Philippines, June 10, 2022. Picture taken with a drone. REUTERS/Adrian Portugal
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MANILA, June 18 : The Philippine central bank raised its key interest rate by 25 basis points for a second time in a row on Thursday and left the door open to additional tightening as inflation pressures remain strong.
Governor Eli Remolona said the central bank would consider larger rate increases, including off-schedule moves, if needed.
“We are prepared to take further monetary action to ensure inflation returns to the 3.0 per cent target,” Remolona said.
The central bank slightly raised its inflation forecasts to 6.4 per cent for 2026 from 6.3 per cent and to 4.5 per cent for 2027 from 4.3 per cent, pushing them further above its 3.0 per cent target. For 2028, inflation is projected to be 3.1 per cent.
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Remolona said oil prices may remain elevated despite the ceasefire agreement between the U.S. and Iran because of damage to oil facilities during the conflict.
“We were hit by a very unusual global supply shock and it was more persistent than what most people had anticipated,” Remolona said. “Even now with the ceasefire agreement, we’re still not sure what would happen.”
According to a Reuters poll, 20 out of 25 economists expected the Bangko Sentral ng Pilipinas to hike its overnight borrowing rate by a quarter point. Five others projected a half-point hike to 5 per cent.
Thursday’s move follows a quarter-point increase at a previous meeting in April as the bank tightened policy to keep a lid on inflation, which eased to 6.8 per cent in May from 7.2 per cent a month earlier.
The central bank next meets in August, when Capital Economics expects another quarter-point increase; subsequent moves are likely to depend on global energy prices.
“If the recent fall in global energy prices is sustained, policymakers will probably start to shift their focus away from inflation and towards the weak economy,” said Jason Tuvey, deputy chief emerging markets economist at Capital Economics.
The central bank held an off-cycle meeting on March 26 when it decided to hold rates, the first such move by a central bank in Asia in response to the U.S.-Israeli war on Iran, reflecting heightened concerns about its impact on inflation and growth.
The May inflation print was driven mainly by slower increases in food and transport costs.
Elsewhere in the region, Indonesia’s central bank also raised its benchmark interest rates by 25 basis points on Thursday, just a week after a surprise off-cycle rate hike, as it seeks to attract fresh capital inflows and halt selling of the rupiah and other assets.
Source: Reuters
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