The Bangko Sentral ng Pilipinas (BSP) delivered back-to-back rate hikes, raising key policy rates by 25 basis points as part of a gradual tightening to temper rising inflationary pressures.
Outgoing BSP Governor Benjamin Diokno said the central bank’s Monetary Board decided to raise the interest rate on the BSP’s overnight reverse repurchase facility by 25 basis points to 2.50 percent, effective Friday, 24 June 2022.
Likewise, the interest rates on the overnight deposit and lending facilities were raised to two percent and three percent, respectively.
“In deciding to raise the policy interest rate anew, the Monetary Board noted that upside risks continue to dominate the inflation outlook up to 2023, with pressures emanating from the potential impact of higher global non-oil prices, the continued shortage in domestic fish supply, as well as pending petitions for transport fare hikes due to elevated oil prices,” the incoming Finance Secretary said.
Meanwhile, Diokno said the impact of a weaker-than-expected global recovery and the possible reimposition of local restrictions amid an uptick in COVID-19 infections continue to be the main downside risks to the outlook.
According to the BSP chief, inflation expectations have continued to rise, highlighting the risk of further second-round effects arising from sustained price pressures.
“Given these considerations, the Monetary Board believes that a follow-through increase in the policy rate enables the BSP to withdraw its stimulus measures while safeguarding macroeconomic stability amid rising global commodity prices and strong external headwinds to domestic economic growth,” Diokno added.
The BSP started its liftoff after it delivered a 25 basis points rate hike last May 19 due to accelerating inflation brought about by soaring oil and commodity pries as a result of the continued Russia-Ukraine conflict.
“The Monetary Board also reiterates its support for the carefully coordinated efforts of other government agencies as part of a whole-of-government approach in implementing non-monetary interventions to mitigate the impact of persistent supply-side factors on inflation,” he said.
In line with the ongoing normalization of its monetary policy settings, Diokno pointed out that the central bank is prepared to take all necessary policy action to bring inflation toward a target-consistent path over the medium term and deliver on its primary mandate of price stability.