Philippines ups interest rate to 3˝% with inflation still high for 2018

By Marisa Wong

Morgantown, W.Va., June 20 – The monetary board of the Bangko Sentral Ng Pilipinas decided at its meeting on Wednesday to raise the interest rate on the bank’s overnight reverse repurchase facility by 25 basis points to 3˝%.

The new rate is effective June 21.

The interest rates on the overnight lending and deposit facilities were also raised by 25 bps.

In deciding to raise the policy rate, the monetary board noted that inflation expectations remained elevated for 2018 and that the risk of possible second-round effects from ongoing price pressures called for follow-through monetary policy action, according to a bank notice.

Although inflation expectations remain within the target range for 2019, elevated expectations for 2018 highlight the risk posed by sustained price pressures on future wage and price outcomes, the board said.

The bank stressed that, equally important, while latest baseline forecasts have shifted lower for 2018 to 2019, upside risks continue to dominate the inflation outlook, even as various measures of core inflation continue to rise.

The board added that the impact of international oil and commodity price movements on overall inflation is expected to be stronger given current “robust” aggregate demand conditions.

Taking all of these factors into consideration, the board believes that further policy action enables the bank to reinforce its signal on safeguarding macroeconomic stability in an environment of rising commodity prices and ongoing normalization of monetary policy in advanced economies.

The board reiterated its support for carefully coordinated efforts with other government agencies in implementing non-monetary measures to mitigate the impact of supply-side factors on inflation.

© 2015 Prospect News.
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