14 Jul 2022
The central bank of the Philippines hiked its key interest rates by 75 basis points on Thursday to curtail mounting inflationary pressures and boost the weakening Peso.
This was the most aggressive tightening move by the Bangko Sentral ng Pilipinas (BSP) since it moved to an inflation-targeting stance in 2002.
Governor of the central bank, Felipe Medalla said in a statement that the rate on the key overnight reverse repurchase facility edged up to 3.25%, CNBC reports.
“In raising the policy interest rate anew, the Monetary Board recognised that a significant further tightening of monetary policy was warranted by signs of sustained and broadening price pressures amid the ongoing normalisation of monetary policy settings,” Medalla commented.
In addition, rates on the central bank’s overnight deposit and lending facilities were increased by 75 basis points, to 2.75% and 3.75%, respectively.
This latest move by the BSP came as a surprise as a policy meeting isn’t scheduled until 18th August. A previous hike took place in May by 25 basis points, and another last month.
According to Finance Minister Benjamin Diokno, the economy was strong enough to absorb this latest increase.
The GDP growth target of 6.5% - 7.5% set for 2022 by the Marcos administration is still attainable, central bank Deputy Governor Francisco Dakila said during a media briefing.
Q2 GDP growth, which will be published on 9th August, "is very likely (to be) strong or even stronger than first quarter numbers", he said.
Moreover, after hitting an all-time low earlier this week against the U.S. Dollar, the Peso gained some ground, and was last up 0.3%, Reuters reports.
However, the Peso is currently the worst-performing currency in Southeast Asia this year.