AUTHORITIES on Thursday, September 27, further tightened monetary policy by raising key interest rates for the fourth time since May this year in a bid to tame inflation.
At its meeting Thursday, the Monetary Board raised the interest rate on the Bangko Sentral ng Pilipinas (BSP) overnight reverse repurchase (RRP) facility by 50 basis points to 4.5 percent, effective Friday, September 28.
The interest rates on the overnight lending and deposit facilities were also raised accordingly.
Policy makers first raised the central bank's interest rate on May 10 by 25 basis points to bring the RRP facility to 3.25 percent, after inflation hit 4.5 percent year-on-year in April from 4.3 percent in March (based on the 2012-based Consumer Price Index series).
The rate was raised by another 25 basis points to 3.5 percent on June 21 and by 50 basis points to 4.0 percent on August 10.
In a statement Thursday, the Monetary Board said it recognized that "a further tightening of monetary policy was warranted by persistent signs of sustained and broadening price pressures".
"Latest baseline forecasts have shifted higher for both 2018 and 2019, with risks to the outlook still leaning toward the upside," the board added.
Inflation hit 6.4 percent in August 2018, less than a percentage point shy of the nine-year high recorded during the Gloria Macapagal Arroyo administration.
The country's economic managers expect inflation to remain elevated "amid indications of second-round effects" before it will taper off and stabilize toward the end of the year.
The Monetary Board said it believed that a tighter monetary policy stance will help steer inflation toward a target-consistent path over the medium term by reducing further risks to the inflation outlook, including those emanating from exchange rate volatility given the continued uncertainty in the external environment amid geopolitical tensions and the normalization of monetary policy in advanced economies.
At the same time, the Monetary Board emphasized the need for timely and appropriate non-monetary measures that will further mitigate the impact of supply-side factors on inflation, including rice tariffication.
Meanwhile, domestic demand conditions have generally held firm, even as the previous monetary policy responses continue to work their way through the economy, the board added. (MVI/SunStar Philippines with PR)