Bangko Sentral hikes benchmark by 25 bps to 6.25 percent


Posted at Mar 23 2023 03:34 PM | Updated as of Mar 23 2023 05:41 PM

MANILA (UPDATE) - The Bangko Sentral ng Pilipinas has raised its benchmark rate by 25 basis points, bringing it to 6.25 percent.

The BSP said the Monetary Board decided to further tighten monetary policy to anchor inflation expectations. 

“With core inflation rising in February despite a modest decline in headline inflation, further monetary policy action was deemed necessary to address broadening price impulses emanating from robust domestic demand and lingering supply-side constraints,” the BSP said. 

The central bank said average inflation is projected to settle above the upper end of the 2-4 percent target range at 6 percent in 2023 before returning to the target at 2.9 percent in 2024. 

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“Moreover, inflation expectations have increased slightly for 2023, while those for 2024 and 2025 remain near the upper end of the target band,” the BSP said. 

It added that the effect of supply shortages on domestic food prices remains a concern. Other risks that may drive inflation include the potential impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023. 

“On the downside, the impact of a weaker-than-expected global economic recovery continues to be the primary factor that could dampen inflation,” the BSP said. 

The BSP's rate hike follows a similar rate hike from the US Federal Reserve. 

Since early last year, the BSP has been raising interest rates as it tried to curb inflation which spiked to 8.7 percent in January, and 8.6 percent in February.