Wednesday, September 19, 2018
Close  
  • share this

BSP hikes rates again amid stubbornly high inflation

By: - Reporter / @daxinq
/ 05:05 PM June 20, 2018

The Bangko Sentral ng Pilipinas on Wednesday raised interest rates for the second time in six weeks to help arrest rising prices of local goods and services which accelerated to a five-year high last month.

The hike — which brings the central bank’s key overnight rate to 3.5 percent — comes in the wake of the record high inflation rates for the first five months of the year, which authorities had originally said would normalize by 2019 without any monetary policy tightening.

ADVERTISEMENT

At the same time, BSP Governor Nestor Espenilla Jr. said regulators will not hesitate to tighten monetary policy further if its latest move proves to be insufficient in reining in upward price pressures.

“In deciding to raise the BSP’s policy rates anew, the Monetary Board noted that inflation expectations remained elevated for 2018 and that risk of possible second-round effects from ongoing price pressures argued for follow-through monetary policy action,”   said during a press briefing.

Bankers and financial market watchers have been clamoring for the central bank to raise interest rates since early this year in anticipation of the price spikes that inevitably came due to high international crude oil and commodity prices, amplified by the tax increases of the Duterte administration that came into effect last Jan. 1.

The country’s inflation rate stands at 4.6 percent as of May — its highest level in at least five years. The peso closed Wednesday’s trading session at P53.48 to $1 — its lowest level in 12 years.

The central bank chief said that, although inflation expectations remain within the target range for 2019, “elevated expectations” for this year highlight the risk posed by sustained price pressures on future wage and price outcomes.

“Equally important, while latest baseline forecasts have shifted to lower for 2018-2019, upside risks continue to dominate the inflation outlook, even as various measures of core inflation continue to rise,” he said.

The BSP also expects the impact of international oil and commodity price movements on overall inflation is expected to be stronger given prevailing robust aggregate demand conditions.

“Given these considerations, the Monetary Board believes that further policy action enables the BSP to reinforce its signal on safeguarding macroeconomic stability in an environment of rising commodity prices and ongoing normalization of monetary policy in advanced economies,” Espenilla said, adding that the board supports carefully coordinated efforts with other government agencies in implementing non-monetary measures to mitigate the impact of supply-side factors on inflation.

“The Monetary Board also emphasized the BSP’s continued vigilance against developments, including excessive peso volatility, that could affect the outlook for inflation,” the central bank chief said. “The BSP is prepared to take further policy action as needed to achieve its price and financial stability objectives.”

ADVERTISEMENT

Going forward, BSP Deputy Governor Diwa Guinigundo said monetary planners expect inflation to ease and, in fact, revised the central bank’s forecasts lower: from 4.6 percent down to 4.5 percent for 2018, and from 3.4 percent down to 3.3 percent in 2019.

Read Next
Don't miss out on the latest news and information.
View comments

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: Bangko Sentral ng Pilipinas, Inflation, Interest rates‎, local goods and services, monetary policy tightening, Philippine news updates
For feedback, complaints, or inquiries, contact us.
entertainment

PH films in Germany, Indonesia and Canada

September 20, 2018 12:40 AM

entertainment

La Diva reunion in the works

September 20, 2018 12:30 AM

entertainment

‘Nun’ star on benefits of watching horror films

September 20, 2018 12:20 AM



© Copyright 1997-2018 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.