Friday August 17, 2018

Monetary Board raises interest rates

CEBU. Bangko Sentral deputy governor Diwa Guinigundo speaks before financial executives in this photo taken in February 2018. (SunStar File Photo)

THE Monetary Board has decided to increase its key policy rate as inflation forecasts "further shifted higher."

The interest rate on the Bangko Sentral ng Pilipinas' (BSP) overnight reverse repurchase (RRP) facility has been raised by 25 basis points to 3.25 percent.

Interest rates on overnight lending and deposit facilities were also raised accordingly, the central bank said in a series of tweets Thursday, May 10.

"In deciding to raise policy interest rate, the MB noted that latest forecasts have further shifted higher indicating that inflation pressures could become more broad-based over the policy horizon," the central bank said.

Inflation, reported at 4.5 percent year-on-year in April from 4.3 percent in March (based on the 2012-based Consumer Price Index series), could break the government's target range of 3 to 4 percent for 2018 "due to temporary supply side factors."

Earlier, the BSP said inflation is expected to remain elevated this year, but decelerate to within the target range in 2019.

"MB believes that a timely increase in the BSP’s policy interest rate will help arrest potential second-round effects by tempering the buildup in inflation expectations," the BSP said.

"MB observed that strong domestic demand allows some scope for a measured adjustment in the policy rate without adversely affecting the country’s economic growth momentum," it added.

Inflation has continued to accelerate as most consumer groups registered price increases.

Prices of food, non-alcoholic beverages and petroleum products have remained elevated due to the excise tax adjustment under the Tax Reform for Acceleration and Inclusion (Train) law. (Marites Villamor-Ilano/SunStar Philippines)