The Philippines’ central bank lifted its benchmark interest rate further at its September meeting in order to curb rising inflation and to strengthen the Philippine peso, that hit a record low against the US dollar as the Fed remains in hawkish mode.
The Monetary Board decided to raise its benchmark overnight reverse repurchase facility rate by 50 basis points to 4.25 percent, the Bangko Sentral Ng Pilipinas said on Thursday.
“Given elevated uncertainty and the predominance of upside risks to the inflation environment, the Monetary Board recognized the need for follow-through action to anchor inflation expectations and prevent price pressures from becoming further entrenched,” the BSP said.
“The domestic economy can accommodate a reasonable tightening of the monetary policy stance, as demand has generally held firm owing to improved employment outturns and ample liquidity and credit.”
The central bank has raised its policy rate for the fifth time thus far this year. The previous rate hike was also by 50 basis points in August.
Interest rates on the overnight deposit and lending facilities were also raised by 50 bps and 25 bps to 3.75 percent and 4.75 percent, respectively.
Policymakers assessed that inflation expectations continue to be broadly anchored over the medium term. The risks to the inflation outlook remain tilted toward the upside until 2023 and broadly balanced in 2024, the bank said.
A weaker-than-expected global economic recovery remains the main downside risk, the bank observed.
The bank expects average inflation to breach the upper end of the 2-4 percent target range this year, at 5.6 percent. The forecast for 2023 was also increased slightly to 4.1 percent, and the projection for 2024 was lowered to 3.0 percent.
The central bank reiterated that it is committed to take all necessary actions to steer inflation towards a target-consistent path over the medium term, consistent with its primary mandate to promote price and financial stability.
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