Bangko Sentral hikes rates anew

Inflation still a concern but forecasts for 2018, 2019 lowered

MONETARY authorities on Wednesday raised key interest rates for the second time this year, noting the need for “follow-through” action to

The Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board ordered a 25-basis point (bps) adjustment, which brought the central bank’s overnight borrowing, lending and deposit rates to 3.5 percent, 4.0 percent and 3.0 percent, respectively.

The Monetary Board , however,

and 2019 to 4.5 percent and 3.3 percent, respectively, from 4.6 percent and 3.4 percent previously. The rate hike followed an identical 25-

having breached the BSP’s 2.0-4.0 target.

“In deciding to raise the BSP’s policy interest rate anew, the Monetary Board noted that inflation expectations remained elevated for 2018 and that the risk of possible second-round effects from ongoing price pressures argued for follow-through monetary policy action,” central bank Governor Nestor Espenilla Jr. said.

While the rise in consumer prices is expected to return to the 2.0-4.0 percent range in 2019, Espenilla stressed that “elevated expectations for 2018 highlight the risk posed by sustained price pressures on future wage and price outcomes.”

“Equally important, while latest baseline forecasts have shifted lower for 20182019, upside risks continue to dominate

rise,” he added.

The impact of international oil and commodity price movements, the BSP

chief noted, is expected to be stronger given prevailing demand conditions.

The latest rate hike, Espenilla said, “enables the BSP to reinforce its signal on safeguarding macroeconomic stability in an environment of rising commodity prices and ongoing normalization of monetary policy in advanced economies.”

“The BSP is prepared to take further policy action as needed to

- ity objectives,” he added.

“The action taken today, in our

He also pointed out that the BSP was not matching monetary policy actions by other central banks like the United States Federal Reserve’s

latest interest rate hike.

“We are always certain that our monetary policy is always determined by our domestic needs,” the BSP governor said.

Central bank Deputy Governor Diwa Guinigundo, meanwhile, said the Monetary Board considered May’s lower-than-expected 4.6 per-

its forecasts.

Expectations of sustained economic activity within the year, rising global oil prices, higher minimum wages and the increased excise taxes for tobacco were also discussed.

Asked if inflation had already peaked in May, Guingundo replied that the BSP expects this “to happen in the third quarter of the year” even as the month-on-month trend appears to be slowing.

Commenting on the rate hike, an analyst from London-based research

to peaking,” Capital Economics Asia economist Alex Holmes said.

could creep up over the next couple of months on the back of higher oil prices and another increase in tobacco duties, it should begin to fall by the end of third quarter.

to continue falling, especially if, as seems likely, Congress passes a bill to lift quotas on rice imports. Pressure from higher oil prices should fade later this year,” Homes added.

Lastly, he noted that January’s indirect tax hikes, which have pushed up the prices of fuel, high-sugar drinks and tobacco, would drop out of the annual comparison at the start of 2019.

Chinese goods in a tit-for-tat exchange that has raised the possibility of a fullblown trade war between the world’s two biggest economies.

Bargain hunting lifted most Asian markets on Wednesday but investors were said to be still anxious.

In Manila, only the mining and oil index gained, rising by 0.25 percent.

Over 1.69 billion issues valued at P5.3 billion changed hands.

Losers led winners, 103 to 92, while 45 stocks remained unchanged.