BSP lifts policy rates by 0.50% in fourth rate hike this 2018

The Bangko Sentral ng Pilipinas (BSP) delivered on Thursday its fourth interest rate hike this year as current inflation conditions remain elevated.

BSP Deputy Governor Chuchi Fonacier said the policy-setting at Monetary Board agreed to boost the overnight borrowing rate by 50 basis points (bps) to 4.50 percent.

Starting Friday, September 28, the overnight lending rate will also be tightened by 50 bps to 5.00 percent and the overnight deposit rate to 4.00 percent.

“The Monetary Board recognized that a further tightening of monetary policy was warranted by persistent signs of sustained and broadening price pressures,” Fonacier said in a press conference at the BSP headquarters in Manila.

This is the fourth rate hike so far this year by the BSP.

Policy rates were tightened by 50 basis points in August.

Rates were also raised by 25 basis points each in May and June.

“Latest baseline forecasts have shifted higher for both 2018 and 2019, with risks to the outlook still leaning toward the upside,” said Fonacier.

“The Monetary Board believed that a tighter monetary policy stance will help steer inflation toward a target-consistent path over the medium-term by reducing further risks to the inflation outlook,” she said.

In the same press conference, Assistant Governor Francis Dakila announced an upward revision in the inflation forecasts of the BSP.

The BSP now expects inflation to settle at 5.2 percent this year, from a previous forecast of 4.9 percent, driven by three factors:

• higher-than-expected inflation figures in August

• higher prices of rice and other agricultural commodities

• rising global oil prices

Dakila said the inflation forecast for 2019 was also revised to 4.3 percent, from 3.7 percent, while the 2020 outlook was kept at 3.2 percent.

The passage of the rice tariffication measure could have a significant impact on inflation, reducing it by 0.7 percent, he said.

Despite the new forecast numbers, Dakila said the BSP will stick to its inflation target of 2 to 4 percent.

The analogy would be, ‘If you’re in class and the passing rate is 70, you don’t change the passing rate. You strive to meet the passing rate’,” he said. —VDS, GMA News