Central bank hikes policy rates by 25 basis points

May 10, 2018

The Monetary Board, policy-making body of the Bangko Sentral ng Pilipinas (VSP), raised policy rates for the first time in four years on Thursday due to rising inflation.

A statement by the board said the interest rate on the BSP's overnight reverse repurchase were raised by 25 basis points to 3.25 percent.

As the inflation rate reached a four-year high early this month, the Monetary Board "believes that a timely increase in the BSP's policy interest rate will help arrest potential second-round effects by tempering the buildup in inflation expectations."

The announcement was made a few hours after the Philippine Statistics Authority reported that first quarter growth figures reached 6.8 percent, well within market expectations.

The Monetary Board said that "while inflation momentum has started to slow down, inflation may breach the inflation target range of 3.0 percent to plus-minus one percentage point for 2018 due primarily to temporary supply-side factors."

Price pressures, said the Monetary Board, continues to lean towards the upside, with price pressures emanting from possible adjustments in transport fars, utility rates and wages. DMS