To further tame inflation, BSP hikes policy rate for 2nd time

MANILA, Philippines – Filipinos bracing for costlier loans and tighter household budgets got fresh cause for concern Thursday after the Bangko Sentral ng Pilipinas (BSP) moved to raise borrowing costs for the second time this year, as inflation remained well above the central bank’s target.

The quarter-point increase brings the BSP’s benchmark rate to 4.75 percent — a level that translates directly into higher interest on home loans, car financing, and credit card debt for consumers and businesses alike.

The move comes as inflation eased slightly to 6.8 percent in May but stayed stubbornly above the BSP’s 2 to 4 percent target for the third straight month, driven largely by elevated global oil and fertilizer prices pushing up domestic fuel and food costs.

READ MORE: PH may implement up to 5 rate hikes due to inflation risks

“Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations,” the BSP said, signaling that price increases are no longer confined to a handful of commodities but are spreading across the economy.

The central bank said the tighter policy is designed to anchor inflation expectations and shore up business sentiment — a balancing act, as higher rates also risk dampening the consumer spending that has underpinned the country’s post-pandemic recovery.

READ MORE: BSP: July inflation likely surpasses 4% target

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