Metro Manila (CNN Philippines, March 23) — The Bangko Sentral ng Pilipinas (BSP) has pushed interest rates higher to 6.25% on Thursday, the highest since November 2008, as surging inflation persisted last month.
The Monetary Board’s move to increase the policy rate by 25 basis points (bps) or a quarter of a percentage point follows the 50-bp hike in February.It also raised interest rates on overnight deposit and lending facilities to 5.75% and 6.75%, respectively.The new rates will take effect Friday, March 24.With core inflation rising in February despite a modest decline in headline inflation, further monetary policy action was deemed necessary to address broadening price impulses emanating from robust domestic demand and lingering supply-side constraints,” BSP Governor Felipe Medalla said during a briefing.
READ: PH inflation slightly eases to 8.6% in February
Medalla said the central bank expects inflation this year to average above the upper end of the target range at 6%.
The BSP chief reiterated that they are “ready to respond further to inflation risks.Imposing higher rates would result in more expensive borrowings from banks and lending companies.This means consumers wanting to secure car and house loans, including business capital, among others, would have to shell out more in paying interest charges.Given this, businesses and consumers are expected to save more and spend less.Clearly, tightening of monetary policy is to reduce demand and we can already see that in housing loans,” Medalla said.While it might seem that Philippine monetary authorities matched the US Fed’s move, Medalla said the decision had been made even before the former announced a small rate hike.There are times that Fed decisions are relevant but not the key factor,” he said.
