THE BANGKO SENTRAL ng Pilipinas (BSP) on Thursday raised its benchmark interest rate to its highest in 14 years, and signaled more tightening albeit at a slower pace.
Families enjoy going to a mall in Antipolo, Rizal, Nov. 14. The Philippine central bank expects inflation to peak in December amid a surge in holiday spending. — PHILIPPINE STAR/ MIGUEL DE GUZMANraised its benchmark interest rate to its highest in 14 years, and signaled more tightening albeit at a slower pace.
The BSP’s rates on the overnight deposit and lending facilities were also increased to 5% and 6%, respectively.“The Monetary Board arrived at its decision after noting the further uptick in headline and the sharp rise in core inflation in November amid pent-up demand,” BSP Governor Felipe M. Medalla said at a briefing after the policy meet.ation accelerated to a 14-year high of 8% in November, from 7.7% in October.
“On the domestic front, trade restrictions, increased prices of fruits and vegetables due to weather disturbances, higher sugar prices, pending petitions for transport fare hikes, as well as potential wage adjustments in 2023 could push inThe impact of a slower global economic recovery is still the major downside risk to the outlook, he added.
“The majority of our pandemic-related measures will expire by the end of 2022 given that the economy has achieved sufficient growth momentum,” he said. The BSP chief said he sees less urgency to match the US Federal Reserve’s monetary tightening next year as bringing inflation back to the 2-4% target remains their top priority.“We think the central bank will raise interest rates again early next year, but with inflation likely to peak soon and growth slowing, the BSP’s tightening cycle is nearing an end,” Capital Economics Senior Asia Economist Gareth Leather said in a note.
He expects the BSP to raise interest rates by 25 bps early next year, and this would mark the end of the tightening cycle.
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