Metro Manila (CNN Philippines, December 15) — The Bangko Sentral ng Pilipinas (BSP) made another rate hike, still matching the US Federal Reserve’s approach in the fight against surging commodity prices.
The central bank on Thursday said it is raising interest rates by 50 basis points (bps) or half of a percentage point to 5.5%, effective Dec. 16.
The Monetary Board also raised interest rates on overnight deposit and lending facilities to 5% and 6%, respectively.
This came as Filipino consumers continued to struggle with elevated inflation, which hit 8% in November.
READ: PH inflation climbs to 8% in November
President Ferdinand “Bongbong” Marcos Jr. previously said the government would raise interest rates to tame inflation and support the Philippine peso, which has been losing ground against the US dollar.
When interest rates are higher, they make money borrowed from banks and lending companies more expensive, discouraging businesses and consumers from spending more.
During the briefing, the BSP said the same level of policy rates were recorded in 2008, as inflation has yet to peak.
“So we now expect latest forecast pointing to inflation peaking in December after faster-than-expected inflation outturn in November due to higher food prices caused by recent typhoons, and in addition higher LPG prices… are expected to contribute to upward price pressures for December,” BSP Governor Felipe Medalla said.
But consumers may get a reprieve next year with lower oil prices and the strengthening of the peso, he added.
The BSP chief said inflation may return to the government’s target range by the second half of 2023, and even approach the low end of the band by the last quarter.
Asked if the BSP would continue to be aggressive in hiking policy rates despite the expected easing of inflation, Medalla hinted that there might be no additional jumbo rate hike in 2023.
“If I were to bet my money, there’s a good chance ito na ‘yung huling (this might be the last) 50 [bps] for quite some time. But I can’t rule that out,” he said.
“The BSP remains steadfast in its commitment to its primary mandate of sustaining price and financial stability and stands ready to take all necessary action to bring inflation within the 2-4 percent government target band over the medium term,” he added.
