BSP lifts rates to fresh 16-year high

In a press conference, BSP Governor Eli Remolona Jr. said the Monetary Board decided to take an off-cycle action to raise interest rate ahead of the scheduled rate-setting meeting on Nov. 16.MANILA, Philippines — The Bangko Sentral ng Pilipinas resumed its tightening cycle as it delivered a 25-basis-point hike during an off-cycle rate-setting meeting yesterday, bringing the benchmark interest rate to a new 16-year high of 6.50 percent.

“I think we fell a little bit behind, that’s the reason for this effort to catch up. I don’t know if the rest of the Monetary Board agrees with that. We didn’t look closely enough at expectations,” he said. After maintaining a hawkish pause in four straight rate-setting meetings in May, June, August and September, the BSP raised the target reverse repurchase rate to 6.50 percent from 6.25 percent, the overnight deposit rate to six percent from 5.75 percent and the overnight lending rate to seven percent from 6.75 percent effective today.Remolona said the policy-making body of the BSP may raise interest rates anew during the scheduled rate-setting meeting on Nov.

Inflation accelerated for the second straight month to 6.1 percent in September from 5.3 percent in August after easing for six straight months to a year-low of 4.7 percent in July after peaking at a 14-year high of 8.7 percent in January.“Looking ahead, the Monetary Board deems it necessary to keep monetary policy settings tighter for longer until inflationary expectations are better anchored and a sustained downward trend in inflation becomes evident,” he said.

Based on its assessment on Sept. 21, the BSP raised its inflation forecasts to 5.8 percent from 5.6 percent for 2023 and 3.5 percent from 3.3 percent for 2024. The projection for 2025 was retained at 3.4 percent. The BSP chief expects the economy to expand by 4.5 percent in the third quarter after slowing to 4.3 percent in the second quarter from 6.4 percent in the first quarter.

“Against this backdrop, we believe inflation could still remain elevated in 2024 unless supply side remedies are deployed while growth will likely grind slower to 4.7 percent in 2023 and 4.5 percent in 2024,” Mapa said. The Bangko Sentral ng Pilipinas has partnered with the Department of Trade and Industry to hold the country’s first...

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