BSP hikes policy rate anew by 25bps to 4.75%

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) raised its benchmark interest rate by a quarter point to 4.75 percent on Thursday, extending its monetary tightening cycle as the inflation outlook continued to deteriorate.

The move came amid inflation easing to 6.8 percent in May but remained among the highest levels in three years and still breached the central bank’s 2 to 4 percent target range for the third consecutive month.

READ: BSP poised to hike interest rates – poll

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“Inflationary pressures remain strong. Global oil and fertilizer prices remain elevated and continue to drive domestic fuel and food prices. Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations,” the BSP said in a statement.

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This is now the BSP’s second rate hike this year, matching the expectations of all 15 economists polled by the Inquirer last week.

Twelve of the economists correctly predicted the quarter-point hike.

“Today’s policy action will help keep inflation expectations anchored and mitigate the risk of second-round effects. The measured monetary policy action will also complement fiscal measures in supporting steady consumption and strengthening business sentiment,” the BSP added.

Higher borrowing costs are intended to curb spending by households and businesses, helping to ease inflationary pressures but also weighing on economic activity. /pai INQ

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