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BSP signals rate hike in June

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The Makati skyline is seen from Skyway Stage 3, July 8, 2021. — PHILIPPINE STAR/ MICHAEL VARCAS

THE PHILIPPINE central bank is likely to raise its key interest rate by another 25 basis points (bps) at its next policy meeting in June.

“We are probably inclined to have another 25-basis-point adjustment on our next Monetary Board meeting which is on June 23,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said at a briefing on Thursday.

The BSP delivered its first interest rate hike since November 2018 when it raised its benchmark interest rates by 25 bps on May 19 as it tries to temper rising inflationary pressures.

The BSP upwardly revised its average inflation forecast for 2022 to 4.6% from the previous forecast of 4.3%, exceeding the 2-4% target band. For 2023, the BSP’s inflation forecast was hiked to 3.9% from 3.6% previously.

The Development Budget Coordination Committee (DBCC) adjusted the average inflation rate assumption to 3.7-4.7% this year, from 2-4% previously, reflecting the impact of soaring oil and food prices caused by the ongoing Russia-Ukraine war and supply chain disruptions.

Inflation climbed to 4.9% in April, the highest in more than three years.

“The economy is strong enough to weather any further hike in local policy rates,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Furthermore, policy rate hike/s in the coming months could also be needed to address risk of second-round inflation effects after the approved minimum wage hikes and possible hike in transport fares, all of which would lead to higher prices of other affected goods and services in the economy,” Mr. Ricafort added. — Keisha B. Ta-asan

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