Metro Manila (CNN Philippines, October 26) – The policy-making Monetary Board has raised the interest rate by 25 basis points to 6.5% effective Oct. 27, earlier than expected, in a bid to slow down the rate of price increase of goods and services.
The country’s inflation rose to 6.1% in September 2023 from 5.3% the previous month.
The Bangko Sentral ng Pilipinas (BSP) last raised policy rates to 6.25% in March 2023.
BSP Governor Eli Remolona earlier hinted that a rate increase may happen in November.
Meanwhile, interest rates on overnight deposit and lending facilities were also bumped up to 6.0% and 7.0%, respectively, from the previous 5.75% and 6.75%.
“The Monetary Board recognized the need for this urgent monetary action to prevent supply-side price pressures from inducing additional second-round effects and further dislodging inflation expectations,” Remolona said Thursday.
“Before today’s monetary policy action, the staff risk-adjusted forecast for 2024 was 4.7 percent (from 4.3 percent previously). This is well above the government’s target range,” he added.
Asked by reporters if the BSP maintained its earlier forecast inflation easing to within the target 2%-4% by this quarter, Remolona said otherwise.
“That’s no longer the case. We don’t think that will happen. In fact, I think from March to July next year, the headline inflation will very likely be above 4%… that’s what our model says,” he said.
Remolona said inflation may drop to around 3% beyond July, and will remain there for the rest of 2024.
The Monetary Board will next meet on Nov. 16 to determine if it will continue to tighten monetary policy. New consumer price index and third quarter economic data figures are expected to be released before this date.
Remolona said it may not yet be the end of policy rate adjustments for the year.
“If things are worse than we thought. We’re hoping the data are nicer to us. If not, we will have to consider a further rate hike,” he said.
