Higher policy rates: How are you affected?
The rate hike was a surprise, as the Monetary Board of the central bank was not scheduled to meet regarding policy until August 18, 2022., the overnight deposit facility to 2.75%, and the overnight lending facility to 3.75%.Monetary policy is the central bank’s key to ensure low and stable inflation, which would help the country achieve a balanced and sustainable economic growth.
The overnight deposit facility involves banks depositing their funds with the central bank, effectively removing excess money from the financial system, and taming inflation. “Higher rates compel money to shift from the real sector to move into the financial sector ,” Nicholas Antonio Mapa, senior economist at the ING Bank Manila, said in an email commentary.BSP Governor Felipe Medalla noted, however, that the Philippine economy can still accommodate further tightening, after itMapa said higher rates can also bring in more foreign investors into the Philippines, driving the local currency higher and offset some of the peso’s weakness so far.
However, higher rates would also mean that borrowing would cost more, as this would bring funding costs higher — higher interest payments for housing loans, auto loans, salary loans, small business loans, and multi-purpose loans, among others.
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