UPDATE1: Philippine central bank hikes rate by 25bps to 4.75% to cap inflation
――Adds revised inflation forecast, official quote in paragraphs 7-11
MANILA, NNA – The Philippine central bank on Thursday tightened credit for the fifth straight time, hiking its benchmark interest rate by 25 basis points to 4.75 percent, in a continued effort to check inflation.
The monetary board’s decision, effective Friday, pushed the key rate to the highest level in more than nine years, following a 50-bps rate hike in September.
The bank has raised rates by a total of 175 basis points (1.75 percentage points) since May.
Bangko Sentral ng Pilipinas said on Twitter that its policymakers “deemed it necessary to respond with proactive policy action to help temper the risks to the inflation outlook including those emanating from continued uncertainty in the external environment.”
Annual consumer inflation rose an average 5.1 percent in the first 10 months of 2018, significantly above the central bank's target range of 2 to 4 percent.
Given the upside risks to the inflation outlook, and inflation expectations have remained elevated as supply-side, possible wage pressures continue to drive price developments, the banks said.
The BSP also revised up its inflation forecast slightly for this year, projecting a 5.3 percent rise in CPI, up from its previous forecast of 5.2 percent.
For 2019, the bank revised down its forecast sharply to 3.5 percent from 4.3 percent on the assumption that a bill to replace limits on rice imports with a tariff will be enacted soon, easing food price increases.
The government’s decision to suspend the second round of increase in excise taxes on petroleum products is also expected to help tame inflation.
“This revised forecast incorporates the impact of the rice tariffication bill as well as the announced suspension on the excise tax on fuel and oil,” Dennis Lapid, deputy director of the banks’ Economic Research Department, told reporters.
The bank revised its inflation outlook for 2020 slightly upward to 3.3 percent from 3.2 percent previously.