The Bangko Sentral ng Pilipinas prepares for a big interest rate hike in the next policy meeting of the Monetary Board this month after the US Federal Reserve raised its own rate by 75 basis points on Wednesday to rein in inflation in the world’s largest economy, Governor Felipe Medalla said Thursday morning.
“As expected, the Fed increased its policy rate this morning [Manila Time] by 75 bps. This supports the BSP’s stance to hike its policy rate by the same amount in its next policy meeting on Nov. 17,” Medalla said in a viber message.
Medalla said the BSP deemed it necessary to maintain the interest rate differential prevailing before the most recent Fed rate hike in line with its price stability mandate and the need to temper any impact on the country’s exchange rate of the most recent Fed rate hike.
“By matching the Fed’s rate hike, the BSP reiterates its strong commitment to its mandate of maintaining price stability by aggressively dealing with inflationary pressures stemming from local and global factors,” Medalla said.
With the Fed’s latest rate increase, the benchmark federal funds rate is now in a range of 3.75 percent to 4 percent. Rates are expected to peak at 4.5 percent to 4.75 percent in 2023, according to the US central bank’s own projections.
Medalla said the local interest rate hike would be “effective after the Nov. 17 meeting, so it is not ‘off cycle.'”