THE Bangko Sentral ng Pilipinas (BSP) on Thursday announced a surprising 75 basis-point hike in its benchmark rate, ahead of the scheduled monetary policy-setting meeting on Aug. 18 to tame rising inflation.
The surprise adjustment brought the overnight reverse repurchase rate, used by banks to price loans, to 3.25 percent from 2.5 percent in June.
For consumers and businesses, this means interest rates on loans will go up.
The interest rate on the BSP’s overnight borrowings from banks was changed during a regular meeting of the Monetary Board (MB) on Thursday.
The next policy meeting of the MB, when such decisions are usually made, is set for Aug. 18 yet.
In a live briefing, BSP Gov. Felipe Medalla said the adjustment takes effect immediately on July 14.
“In this morning’s regular meeting, the Monetary Board decided to raise the interest rate on the BSP’s overnight reverse repurchase facility by 75 basis points to 3.25 percent effective today,” Medalla said.
The interest rates on the overnight deposit and lending facilities were raised to 2.75 percent and 3.75 percent, respectively, the central bank said.
So far, the BSP has raised interest rates by 125 basis points this year as the inflation rate continued to rise.
Inflation accelerated to 6.1 percent in June, above the two to four percent target range, as oil and other commodity prices continues to increase.
“By taking urgent action, the Monetary Board aims to anchor inflation expectations further and temper mounting risks to the inflation outlook in particular,” he added.
“In raising the policy interest rate anew, the Monetary Board recognized that a significant further tightening of monetary policy was warranted by signs of sustained and broadening price pressures amid the ongoing normalization of monetary policy settings,” said Medalla.
“The Monetary Board noted that favorable conditions arising from the strong rebound in growth thus far in the year suggest that the domestic economy can accommodate a further tightening of monetary policy settings,” he added.
The Philippine economy regained pre-pandemic levels, growing at 8.3 percent year-on-year in the first quarter of 2022.