Monetary Board raises policy rates anew by 50 basis points
Bangko Sentral ng Pilipinas

Monetary Board raises policy rates anew by 50 basis points

Aug 18, 2022, 9:25 AM
Rose De La Cruz

Rose De La Cruz


The Monetary Board, Bangko Sentral ng Pilipinas' policy-making body, raised today the overnight repurchase facility rates by 50 basis points effective tomorrow which would drive interest rates for overnight deposits and lending to 3.25 and 4.25 percent, respectively.

The Monetary Board, in its policy meeting today, raised the interest rates on Bangko Sentral ng Pilipinas' overnight reverse repurchase facility by 50 basis points (bp) to 3.75 percent, effective tomorrow (August 19).

The interest rates on overnight deposits and lending facilities will thus be raised to 3.25 percent and 4.25 percent, respectively.

The BSP's latest baseline forecasts have shifted higher for 2022, with average inflation projected to breach the upper end of the 2 to 4 percent target rate at 5.4 percent.

The forecasts for 2023 and 2024 have declined to 4 percent and 3.2 percent, respectively, the inflation target remains at risk over the policy horizon owing to broadening price pressures. Elevate inflation expectations would highlight the risk of further second-round effects.

Upside risks also continue to dominate the inflation outlook up to 2023 due to the potential impact of higher global non-oil prices, the continued shortage in domestic fish supply, the sharp increase in the price of sugar, as well as pending petitions for transport fare increases. Meanwhile, the impact of a weaker-than-expected global economic recovery as well as the resurgence of local COVID-19 infections continue to be the main downside risks to the outlook.

At the same time, despite some moderation in economic activity in recent months, overall domestic demand conditions have generally held firm, supported by improved employment outturns and by ample liquidity and credit.

Although the MB Monetary Policy Committee meets at least four times a year, it has held in July an emergency policy meeting when it raised the rates to 75 bp to control inflation. Despite the policy rates adjustment inflation, particularly food inflation, still surged.

For these reasons, the Monetary Board deemed further monetary action to be necessary to anchor inflation expectations and avoid a further breach in the inflation target over the policy horizon. The favorable growth outcome in the first half of the year also gives the BSP the flexibility to act against inflation pressures while allowing domestic demand to sustain its recovery momentum amid prevailing headwinds.

The Monetary Board also continues to urge timely non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices.

The BSP reassures the public of its commitment and readiness to take all necessary actions to steer inflation towards a target-consistent path over the medium term in keeping with its price and financial stability mandates.

Tags: #MonetaryBoard, #BSP, #policyrateshiked, #inflation

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