Philippines central bank raises interest rates to curb inflation

The Philippines’ central bank on Thursday raised interest rates for the first time in more than three years, in a bid to rein in inflation as rising fuel prices and food shortages drive up the cost of living .

Robust economic growth and jobs in the first quarter gave the monetary authority the leeway it needed to continue “undoing its pandemic-induced interventions,” said Benjamin Diokno, the bank’s governor.

For the latest headlines, follow our Google News channel online or through the app.

Reducing inflationary pressures was now the focus, as rising global oil prices, the conflict in Ukraine and a domestic shortage of pork and fish weighed on household budgets.

“Average inflation is expected to exceed the upper end of the 2-4% target range in 2022 at 4.6%, while the forecast for 2023 has moved closer to the upper end of the target range at 3.9 %,” Diokno said.

The 25 basis point increase comes after the central bank held rates at an all-time low of 2% since November 2020. The last time it raised rates was in November 2018.

The monetary authority’s overnight reverse repo facility increased to 2.25% from Friday, while the overnight deposit and lending facilities were raised to 1.75% and 2 .75% respectively.

Diokno warned that the central bank was “just beginning the monetary policy tightening cycle,” suggesting further rate hikes were likely.

Thursday’s increase would help avoid “second-round effects,” such as higher-than-expected minimum wage increases in some regions, he said.

RCBC chief economist Michael Ricafort said economic growth was stronger than expected at 8.3% in the first quarter and other data indicated the “economy could hold up” to further rises.

Economic activity was boosted in the first three months of the year by the lifting of COVID-19 restrictions and the start of the election campaign, which boosted consumer spending.

Ricafort said pork supplies had been affected by African swine fever outbreaks while fish shortages were caused by bans on fishing in certain waters.

Read more:

Philippines election victory brings Marcos back to power and polarization

Eight people killed in a house fire in the Philippines

Filipino Expert Says Some Drug War-Related Death Certificates Were Forged

Comments are closed.