Philippines raises policy rate by 25 bps to 3¾% as inflation creeps up

By Susanna Moon

Chicago, July 31 – The Monetary Board of the Bangko Sentral ng Pilipinas decided to raise the overnight borrowing rate by 25 basis points to 3¾% at its meeting on Thursday.

The rate hike was a “preemptive” move against inflation pressures and higher inflation expectations, according to a bank notice.

“Latest baseline forecasts indicate that the inflation target could be at risk, as the forecasts have shifted closer toward the higher end of the target range of 3±1 percent for 2015,” the bank said.

Pricing pressures are coming from higher food prices, short-term volatility in international oil prices and pending petitions for adjustments in power rates and transport fares, the bank noted.

Inflation expectations are within target but moving toward the upper end of the inflation target range, particularly for 2015.

The bank said, “The continued favorable outlook for domestic demand allows some scope for a measured adjustment in policy rates without adversely affecting the country’s economic growth prospects.”

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