MANILA (UPDATE) - The Bangko Sentral ng Pilipinas on Thursday raised the country's benchmark interest rate by another 50 basis points as it tries to put the brakes on inflation.
The central bank’s overnight reverse repurchase rate, which banks use to price loans, is now at 5.5 percent, following the adjustment, BSP Gov. Felipe Medalla announced in a live briefing.
BSP Deputy Governor Francisco Dakila said the last time the benchmark rate was at 5.5 percent was in December 2008, or 14 years ago. Inflation also hit a 14-year high of 8 percent in November, according to government data.
The BSP matched the downshift by the US Federal Reserve after its Chairman Jerome Powell announced late Wednesday a 50-bps hike, which was lower than the successive 75-bps implemented in the previous meetings.
"The Monetary Board arrived at its decision after noting the further uptick in the headline and the sharp rise in core inflation in November amid pent-up demand. Moreover, upside risks continue to dominate the inflation outlook up to 2023 while remaining broadly balanced in 2024," Medalla said.
The BSP chief said the central bank may still hike rates next, but not at the same pace as this year.
"There's a good chance na ito na huling 50 [basis point hike] for at least early... for quite some time, but I cannot rule that out," he said.
INFLATION TO PEAK IN DECEMBER
Medalla said inflation would likely peak in December following the faster-than-expected outturn the previous month.
Central bank estimates showed that inflation is likely to remain elevated at an average of 5.8 percent in 2022. But BSP Deputy Governor Francisco Dakila said the inflation outlook for 2023 was revised upwards to 4.5 percent from 4.3 percent.
Upward price pressures for 2023 include the approved rate water rate hike, among others, which could be partly offset by lower crude oil prices and a strengthening peso, he said
Meanwhile, Gov. Medalla said the impact of the monetary policy adjustments on the gross domestic product (GDP) is minimal, seen at 0.07 percent of GDP in 2023.