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BSP to tighten interest rates by 50 basis points on Thursday, Sept. 27 —FMIC, UA&P


The Bangko Sentral ng Pilipinas is raising interest rates by another 50 basis points during a policy-setting meeting on Thursday, September 27, according to First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P).

In the September 2018 edition of “The Market Call,” FMIC and UA&P said the BSP will tighten policy rates for the fourth time this year by another 50 basis points.

“We expect the Monetary Board to lift policy rates by 50 basis points to 4.5 percent this month as it seeks to cool inflationary expectations and exchange rate pressures,” the report read.

Inflation accelerated by 6.4 percent in August, the fastest in over nine years since logging in at 6.6 percent in March 2009.

The peso sank to P54.31:$1 on Tuesday, its weakest in over 12 years since it closed at P54.425 against the dollar on Nov. 22, 2005.

The central bank’s policy-setting Monetary Board hiked policy rates by 50 basis points last August, its third and most aggressive move so far this year, in light of persistent inflationary concerns.

The overnight borrowing rate was increased to 4.00 percent, while the overnight lending rate was adjusted to 4.50 percent, and the overnight deposit rate to 3.50 percent.

“New positive economic data have failed to dominate the financial markets as faster inflation and renewed peso weakness ... clouded the overall picture,” FMIC and UA&P said.

The Market Call noted the impending rate increase could help “support” the stock market.

“Inflation which may have peaked in Q3 and BSP’s impending policy rate increases should provide market support for the PSEi,” it said.

“However, this does not guarantee an upswing, not until the market gets convinced that inflation has definitely started easing and external conditions improve,” it said.

The BSP intends to take a “strong” monetary action to address inflationary concerns.

“How much stronger do you want? We will take stronger monetary policy action,” BSP Deputy Governor Diwa Guinigundo said. —VDS, GMA News

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