Philippine central bank hikes overnight borrowing rate to 6%

THE Philippine central bank raised its benchmark interest rate by 50 basis points to 6 per cent on Thursday (Feb 16), and flagged its readiness to do more to tame inflation, which is running at 14-year highs.

Thirteen of the 24 economists polled earlier by Reuters had expected the Bangko Sentral ng Pilipinas (BSP) to hike rates by half a point on Thursday, after January’s inflation rate came in at a faster-than-expected 8.7 per cent. The rest expected a quarter-point rise.

“An upward adjustment in the policy interest rate would also prevent inflation expectations from drifting further away from the target band,” BSP governor Felipe Medalla told reporters after monetary authorities’ first rate-setting meeting this year.

The Monetary Board believed a strong, follow-through monetary policy response was necessary to reduce the risk of a breach in the inflation target in 2024, he added.

The BSP raised its average inflation forecast for 2023 to 6.1 per cent from 4.5 per cent, but said it could return to a range within target by 2024. It projected a 3.1 per cent rate for that year, up from a previous estimate of 2.8 per cent.

Thursday’s 50-basis-point hike marked the eighth time the central bank has raised interest rates since last year to cool red-hot inflation. REUTERS