The Central Bank of the Philippines (BSP) has raised its key interest rate for the second straight month to curb inflation, raising its key policy rate by 25 basis points from June 24 to 2.5%.
This change, which analysts widely expected, followed the rise of 25 basis points in May, the country’s first rate hike since 2018.
According to the Financial Commission, overnight deposits and lending facilities have been raised to 2.0% and 3.0%, respectively. statement..
“The Financial Commission forecasts inflation through 2023 due to the potential impact of rising global non-oil prices, the ongoing shortage of domestic fish supply, and the pressure from pending petitions to raise freight rates. Note that upward risk will continue to dominate, due to soaring oil prices. “
Inflation in the Philippines soared to 5.4% last month, but the Philippine peso fell to its lowest level in more than three and a half years, plummeting about 6% this year.
The Financial Commission raised its inflation forecast this year to 5.0% and 4.2% in 2023, exceeding the central bank’s target range of 2-4%. We also predict that inflation will drop to 3.3% in 2024.
“The Financial Commission says that raising the policy rate follow-through will allow the BSP to withdraw its stimulus while maintaining macroeconomic stability amid rising global commodity prices and strong external headwinds for domestic economic growth. I believe. “
It also reaffirms support for “carefully coordinated efforts by other government agencies as part of a government-wide approach in implementing non-financial interventions to mitigate the impact of sustainable supply-side factors on inflation.” did.
The move followed last week’s decision by the Federal Reserve to raise interest rates by 0.75%. This is the largest increase since 1994 and the third increase this year to counter inflation in the country.