2023.03.2312:48:00UTC+00Philippine Central Bank Hikes Rate For Ninth Straight Session

The Philippine central bank raised its benchmark rates for the ninth consecutive policy session to gain control over inflationary pressure emanating from strong domestic demand and lingering supply-side constraints. That said, the bank softened its pace of tightening given the stability in the currency.

The Monetary Board of the Bangko Sentral ng Pilipinas, led by Governor Felipe Medalla, lifted the interest rate on the overnight reverse repurchase facility by 50 basis points to 6.50 percent.

The interest rates on the overnight deposit and lending facilities were raised to 5.75 percent and 6.75 percent.

Policymakers observed that the continuation of monetary tightening is warranted to anchor inflation expectations. As core inflation strengthened further, monetary policy action was deemed necessary to address broadening price impulses, the bank said.

The BSP forecast inflation to settle above the upper end of the 2-4 percent target range at 6.0 percent in 2023 before returning to the target at 2.9 percent in 2024.

Inflation expectations for both 2024 and 2025 remained near the upper end of the target band. Moreover, the balance of risks to the inflation outlook continued to tilt heavily towards the upside. "Further policy tightening will also preserve the buffer against external spillovers amid heightened uncertainty and volatility emanating from financial sector distress in advanced economies," the bank said.

Even as the policymakers said the Philippine banking system is resilient to evolving market conditions, the BSP said it continues to keep a watchful eye over the developments in the international banking system.

Although headline inflation has started to fall, it remained well above the target and the central bank is likely to raise interest rates once more this year at its May meeting, Capital Economics economist Gareth Leather said.