BSP hikes rate by 25 basis points to 4.75%

The Monetary Board decided to raise the interest rate on the Bangko Sentral ng Pilipinas (BSP)'s overnight reverse repurchase (RRP) facility by 25 basis points to 4.75 percent, effective Friday, Nov. 16.

The interest rates on the overnight lending and deposit facilities were raised accordingly.

While the latest inflation forecasts show inflation settling within the target band of three percent ± one percentage point in both 2019 and 2020, after considering the impact of non-monetary measures, including the rice tariffication bill and the suspension of the oil excise tax, the Monetary Board decided to raise the policy rate by 25 basis points, given the upside risks to the inflation outlook and given that inflation expectations have remained elevated as supply-side and possible wage pressures continue to drive price developments.

At the same time, the Monetary Board believes that prospects for the domestic economy remain generally favorable and allow some scope for a measured adjustment in the policy rate to rein in inflation expectations and preempt further second-round effects.

The board deemed it necessary to respond with proactive policy action to help temper the risks to the inflation outlook, including those emanating from the continued uncertainty in the external environment amid tighter global financial conditions and trade tensions among major economies.

"Nevertheless, the Monetary Board continues to emphasize the need for follow-through non-monetary measures to mitigate the impact of supply-side factors on inflation. The BSP remains prepared to take appropriate policy actions as needed to ensure the achievement of its price and financial stability objectives," it said in a statement. / PR

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