The Philippine central bank (BSP) has decided to raise its key
interest rates for the first time in more than one-and-a-half year.
The
BSP’s Monetary Board raised by 25 basis points its overnight borrowing
and lending rates to 3.75 percent and 5.75 percent, respectively,
according to news reports.
BSP Governor Amando M. Tetangco Jr.
was quoted as saying that the Monetary Board’s decision is a pre-emptive
response to signs of inflation pressures and elevated inflation
expectations.
Inflation is expected to settle at an average
rate of 4.33 percent this year from a previous forecast of 4.4 percent,
while the 2015 average is expected to hit 3.72 percent from an earlier
projection of 3.65 percent.
The BSP set a two-to four-percent inflation target range for next year, lower than this year’s three-to five-percent goal.
For 2016, the BSP expects inflation to average 2.8 percent, near the high-end of the two to four percent target range.
According
to Tetangco, the balance of risks to the inflation outlook continues to
be tilted toward the upside, with price pressures emanating from higher
food prices, short-term volatility in international oil prices, and
pending petitions for adjustments in power rates and transport fares.
The Monetary Board believes that an increase in the BSP’s policy
rates will moderate inflation pressures and arrest potential second
round effects by helping anchor inflation expectations.-VNA