The Bangko Sentral ng Pilipinas (BSP) on Thursday hiked its key rates for the second straight month, as inflation risks remain tilted to the upside moving forward.
The Monetary Board increased the key policy rates by 25 basis points—the overnight reverse repurchase facility to 2.5%, the overnight deposit facility to 2.0%, and the overnight lending facility to 3.0%—effective Friday, June 24.
The central bank already hiked interest rates by 25 basis points in May, its first increase since 2018.
“In deciding to raise the policy interest rate anew, the Monetary Board noted that upside risks continue to dominate the inflation outlook up to 2023,” BSP Governor Benjamin Diokno told reporters in a briefing.
Diokno cited risks such as the potential impact of higher global non-oil prices, the continued shortage in the domestic fish supply, and pending petitions for transport fare hikes due to elevated oil prices.
Inflation has been on an uptrend this year, hitting a three-year high of 5.4%, driven mainly by the increase in food and non-alcoholic beverages. It is expected to average 5.6% in the second half.
The Monetary Board also revised its inflation outlook for the year to 5.0% from its earlier outlook of 4.6%, given the higher-than-expected reading in May, an expected acceleration in June, higher assumptions for global oil and non-oil prices, and the approved provisional jeepney fare hikes.
“Given these considerations, the Monetary Board believes that a follow-through increase in the policy rate enables the BSP to withdraw its stimulus measures while safeguarding macroeconomic stability amid rising global commodity prices and strong external headwinds to domestic economic growth,” Diokno said.
“The Monetary Board also reiterates its support for the carefully coordinated efforts of other government agencies as part of a whole-of-government approach in implementing non-monetary interventions to mitigate the impact of persistent supply-side factors on inflation,” he added.
The inflation outlook for the coming year was also hiked to 4.2% from the previous projection of 3.9%, before decelerating to 3.3% in 2024.
“In line with the ongoing normalization of its monetary policy settings, the BSP is prepared to take all necessary policy action to bring inflation toward a target-consistent path over the medium term and deliver on its primary mandate of price stability,” Diokno said. —VBL, GMA News