Central bank raises policy rates by .50 percentage points
The Bangko Sentral of the Philippines ( BSP) said Thursday policy rates were raised by .50 percentage points, the third time the monetary authority did so to combat inflation.
BSP Governor Nestor Espenilla said in a televised press conference that the new rate will take effect on Friday. It was the third time this year that the BSP raised rates, bringing the total increase to one percentage point.
"The Monetary Board decided to raise the interest rate on the BSP's overnight reverse repurchase (RRP) facility by 50 basis points to 4 percent, effective Friday. The interest rates on the overnight lending and deposit facilities were likewise raised accordingly," said Espenilla, reading a statement.
Espenilla said the Monetary Board, the policy-setting body of the BSP, "noted that latest baseline forecasts have shifted higher over the policy horizon, indicating some risk of inflation exceeding the target in 2019."
"Upside risks also continue to dominate the inflation outlook, as the sustained increase in core inflation suggests broadening price pressures amid resilient aggregate demand conditions. Meanwhile, inflation expectations remain elevated, although staying w ithin the target of 3.0 percent ± 1.0 percentage point for 2019," the statement said.
Thus, the Monetary Board undertook " stronger monetary action to be necessary to rein in inflation expectations and prevent sustained supply-side price pressures from driving further second-round effects, even as the previous monetary policy responses continue to work their way through the economy"
"The Monetary Board believed that the series of policy rate adjustments thus far in 2018 w ill help reduce further the risks to inflation, including those emanating from the ongoing normalization of monetary policy in advanced economies and its impact on the foreign exchange market, and bring inflation toward a target-consistent path over the medium term," the statement said.
Espenilla's announcement came a few hours after the Philippines reported that second quarter growth came in at six percent. DMS