Bangko Sentral raises interest rates by 25 bps


Posted at Jun 05 2008 05:05 PM | Updated as of Jun 06 2008 01:05 AM


The Philippine central bank raised its headline interest rates by a quarter of a percentage point on Thursday to combat inflation that is running at a 9-year high.

It said also that it was willing to take further action when necessary to control inflation.

Economists had been divided on whether the central bank would raise rates or keep them unchanged. On the one hand, inflation is the result of soaring oil and food prices not domestic demand, but on the other hand, inflation is so high it needs to be brought under control, economists say.

The rise takes the overnight borrowing rate to 5.25 percent and the overnight lending rate to 7.25 percent.

Bangko Sentral ng Pilipinas said supply-driven pressures were starting to feed into demand and that inflation in 2008 was likely to reach 7-9 percent.

Earlier on Thursday, the Philippines said the annual inflation rate jumped in May to a nine-year high of 9.6 percent.

The central bank said rates on its Special Deposit Accounts (SDAs) would increase by 25 basis points to match the increase in headline rates.