THE Monetary Board decided to raise the interest rate on the Bangko Sentral ng Pilipinas’ overnight reverse repurchase (RRP) facility by 50 basis points to 4.5 percent, effective today. The interest rates on the overnight lending and deposit facilities were also raised accordingly.
“The Monetary Board decided to raise the BSP policy interest rate anew to anchor inflation expectations and to safeguard the inflation target over the policy horizon,” it said in a statement.
The Monetary Board 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. With supply-side forces expected to continue to drive inflation in the coining months, inflation expectations have remained elevated amid indications of second-round effects.
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 said 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 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.
The BSP reassured the public of its commitment to take all necessary policy actions to address the threat of high inflation and deliver on its primary mandate of price stability.
In the US, the Federal Reserve also rose key interest rates for a third time this year. It lifted its short-term rate--a benchmark for many consumer and business loans --by a modest quarter-point to a range of two percent to 2.25 percent.
Chairman Jerome Powell said this did not amount to a policy change. The Fed also projected another rate hike by end 2018 and predicted that it will continue to tighten credit into 2020 to manage growth and inflation. (PR / WITH AP)