Metro Manila (CNN Philippines, November 3) — The Philippines will keep pace with the US Federal Reserve’s move raising interest rates by 75 basis points (bps) this November to soften the impact on the peso and beat inflation, the central bank’s chief said Thursday.
Bangko Sentral ng Pilipinas (BPS) Governor Felipe Medalla said they would increase the policy rate by the same amount after the Monetary Board meets on Nov. 17.
Once it takes effect, this would bump up the key interest rate to 5%.
This comes following Fed’s decision to further hike interest rates to control soaring prices.
“The BSP deems it necessary to maintain the interest rate differential prevailing before the most recent Fed rate hike, in line with its price stability mandate and the need to temper any impact on the country’s exchange rate of the most recent Fed rate hike,” Medalla said in a statement.
“By matching the Fed’s rate hike, the BSP reiterates its strong commitment to its mandate of maintaining price stability by aggressively dealing with inflationary pressures stemming from local and global factors,” he said.
Increasing interest rates impacts how consumers access loans as banks and lending companies shadow the BSP’s rates for their loan, credit card, and deposit interests. This would mean Filipinos wanting to own new cars, houses, or business capital, among others, would have to deal with more costly borrowings.
In turn, businesses and consumers are seen to save more and spend less.
The BSP said the October inflation rate might accelerate anew, settling between 7.1% to 7.9% way faster than September’s 6.9% as Filipinos continued to grapple with fuel and agricultural price hikes.
READ: October inflation seen above 7% BSP
The Philippine Statistics Authority is set to disclose October’s inflation data on Friday, Nov. 4.
President Ferdinand “Bongbong” Marcos Jr. already signaled higher interest rates to tame inflation and support the Philippine peso.
“The BSP remains vigilant in monitoring all risks to the inflation outlook and is prepared to take necessary policy actions to bring inflation toward a target-consistent path, wherein the average year-on-year headline inflation will be within the target band of 2% to 4% in the second half of 2023 and in the full year of 2024,” Medalla said.
