Philippine hikes rates by 50 bps, keeps hawkish view

By Neil Jerome Morales and Karen Lema

MANILA, August 18 (Reuters)The central bank of the Philippines raised its benchmark interest rates by half a percentage point on Thursday, as expected, and left the door open for further hikes to bring inflation back into its target range.

The Bangko Sentral ng Pilipinas (BSP) lifted the overnight repo facility rate PHCBIR=ECI 3.75%, as most economists had predicted in a Reuters poll from Aug. 8-15.

The deposit and overnight lending facility rates were raised by 50 basis points, to 3.25% and 4.25%, respectively.

“The Monetary Council considered that further monetary measures were needed to anchor inflation expectations and avoid a further overshoot of the inflation target on the policy horizon,” BSP Governor Felipe Medalla told reporters. journalists.

The BSP, which has raised rates by a total of 175 basis points this year, remains committed to “taking all necessary steps to steer inflation onto a path consistent with the medium-term objective,” Medalla added.

Inflation in the Philippines, which hit a nearly four-year high of 6.4% last month, averaged 4.7% from January to July, above the target range of 2 % to 4% of BSP for the year.

Adding pressure from imported inflation, the Philippine peso PHP= has fallen almost 9% this year against the dollar – the third worst performance among Asian currencies.

BSP raised its average inflation forecast for 2022 to 5.4% from 5.0%. However, he lowered the average inflation forecast to 4.0% from 4.2% for 2023, and to 3.2% from 3.3% for 2024.

Despite the slowdown in the domestic economy in the second quarter, when inflation hurt consumer spending, Medalla said broad domestic demand conditions generally remained firm, supported by improving employment numbers. and abundant liquidity.

Ten of 16 economists in the August 8-15 Reuters poll predict another 25 basis point hike at the September meeting, taking rates to 4.00%, where they were before the COVID-19 pandemic .

Seven economists predicted rates would reach 4.25% or higher by the end of 2022, six predicted rates would reach 4.00%, while the other three said rates would be 3.75% or lower.

(Reporting by Neil Jerome Morales, Karen Lema and Enrico Dela Cruz; Editing by Himani Sarkar)

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