MANILA – The Bangko Sentral ng Pilipinas (BSP) raised interest rates for the fifth consecutive time this year.
In a statement delivered at a media briefing late last week, the BSP announced that it found it necessary to raise interest rates by another 25 basis points due to the lingering risks of high inflation.
This brings the current interest rate to 4.75 percent.
“After considering the impact of non-monetary measures, including the rice tariffication bill and the suspension of the oil excise tax, the Monetary Board decided to raise the policy rate by 25 basis points given the upside risks to the inflation outlook and given that inflation expectations have remained elevated as supply-side and possible wage pressures continue to drive price developments,” the BSP said in a statement.
The Monetary Board is the policy-making arm of the BSP.
Inflation remained at 6.7 percent in October, as food prices continue to be high. This led the government to speed up the passage of the Rice Tariffication Act and to suspend the implementation of another fuel excise tax hike based on the Tax Reform for Acceleration and Inclusion law.
“The Monetary Board deemed it necessary to respond with proactive policy action to help temper the risks to the inflation outlook, including those emanating from the continued uncertainty in the external environment amid tighter global financial conditions and trade tensions among major economies,” the BSP added.
The central bank said that it had a favorable outlook on the economy, and that the interest rate hike was done to rein in inflation expectations.
It added that the government needs to follow through on its non-monetary measures, like the Rice Tarrification Act and the suspension of fuel excise tax to mitigate supply-side inflationary pressures.
The BSP also raised its inflation expectations for the full year of 2018 to 5.3 percent from 4.9 percent.
It lowered its 2019 inflaiton forecast to 3.5 percent from 3.7 percent but hiked its 2020 forecast to 3.3 percent from 3.2 percent.
The BSP has raised interest rates by a total of 175 basis points for the year.
The Monetary Board will have its last meeting for the year in mid-December. (CNN Philippines)
