Philippine central bank hikes interest rates anew as inflation stays elevated

Pearl Bantillo


SINGAPORE (ICIS)–The Philippines’ central bank hiked its policy interest rates by 25 basis points on Thursday with inflation expected to remain elevated and projected to average higher than the target this year.

  • Full-year inflation average projected at 6.0%
  • February inflation dips but remains above 8.0%
  • 25bps rate hike likely in May before pause

Effective 24 March, the interest rates at its overnight reverse repurchase facility will be 6.25%, the Bangko Sentral ng Pilipinas (BSP) said in a statement.

The decision came after the Federal Reserve issued a similar increase in its benchmark interest rates despite recent bank failures in the US.

Current conditions “warranted a continuation of monetary tightening to anchor inflation expectations,” the BSP said, adding that it expects 2023 inflation to average 6.0%, above the 2.0-4.0% target range, before falling to an average of 2.9% in 2024.

“The effect of supply shortages on domestic food prices remains a concern, while the potential impact of higher transport fares, increasing electricity rates, as well as above-average wage adjustments in 2023 point to the broader-based nature of price pressures,” the BSP stated.

The central bank noted that it may not be the end of its monetary tightening cycle.

“Further policy tightening will also preserve the buffer against external spillovers amid heightened uncertainty and volatility emanating from financial sector distress in advanced economies,” it said.

Consumer inflation in February stood at 8.6%, down from 8.7% in the previous month and dipping for the first time in six months.

“We think the slowdown in inflation was a major factor in the BSP’s decision to ease the pace of tightening,” said Makoto Tsuchiya, assistant economist, at the research firm Oxford Economics in a note.

In previous monetary policy meetings, the BSP had been raising interest rates by 50bps.

“We expect the BSP to raise the policy rate again by 25bps at its May meeting, before holding the rate at that level throughout the year,” Tsuchiya said.

Barring any supply shock, inflation in the Philippines should trend down.

“However, risk of further/bigger hikes cannot be ruled out if the peso depreciates a lot given ongoing external pressures,” the economist said.

Meanwhile, the BSP is keeping a “watchful eye over developments in the international banking industry,” even as it assessed the local banking system as “resilient to evolving market conditions.”

Focus article by Pearl Bantillo

Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets.

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.


ICIS Premium news service

The subscription platform provides access to our full range of breaking news and analysis

Contact us now to find out more

Speak with ICIS

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?