THE Bangko Sentral ng Pilipinas has pushed the interest rates higher by 25 basis points to 6.25 percent effective Friday, March 24, 2023, during the Monetary Board (MB) policy meeting Thursday, March 23.

Interest rates on the overnight deposit and lending facilities will be set to 5.75 percent and 6.75 percent, respectively.

“With core inflation rising in February despite a modest decline in headline inflation, further monetary policy action was deemed necessary to address broadening price impulses emanating from robust domestic demand and lingering supply-side constraints,” BSP chief Felipe Medalla said in a statement.

The country’s headline inflation slowed down to 8.6 percent in February 2023, from 8.7 percent in January 2023, as price increases of certain food commodities and energy eased. The average inflation rate for the first two months of the year stood at 8.6 percent.

The BSP said the effect of supply shortages on domestic food prices remains a concern, while the potential impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023 point to the broader-based nature of price pressures. On the downside, the impact of a weaker-than-expected global economic recovery continues to be the primary factor that could dampen inflation.

“Given these considerations, the Board decided that follow-through monetary action would help ease persistent price pressures from here and abroad as well as further realign inflation expectations with the target band over the policy horizon. Further policy tightening will also preserve the buffer against external spillovers amid heightened uncertainty and volatility emanating from financial sector distress in advanced economies,” Medalla said.

The BSP still sees an elevated inflation rate over the near term. Average inflation is projected to settle above the upper end of the two to four percent target range at six percent in 2023 before returning to the target at 2.9 percent in 2024. (KOC)