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Friday, March 29, 2024

BSP hikes interest rate by 75 bps to 3.25%

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The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, raised on Thursday morning the benchmark policy interest rate by 75 basis point to 3.25 percent to contain inflation and prevent the further slide of the peso against the US dollar

“During this morning’s regular meeting, the Monetary Board decided to raise the interest rate on the BSP’s overnight reverse repurchase facility by 75 basis points to 3.25 percent, effective 14 July 2022,” BSP Governor Felipe Medalla said in a Facebook live statement on the off-cycle move.

The BSP made the adjustment after the United States announced that inflation rate in June hit 9.1 percent, the highest in nearly 41 years, adding pressure on the Federal Reserve to make more aggressive interest rate hike which encouraged investors to invest in the US dollar.

The BSP said it also raised the interest rates on the overnight deposit and lending facilities to 2.75 percent and 3.75 percent, respectively.

“In raising the policy interest rate anew, the Monetary Board recognized that a significant further tightening of monetary policy was warranted by signs of sustained and broadening price pressures amid the ongoing normalization of monetary policy settings,” Medalla said.

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Medalla said favorable conditions arising from the strong rebound in growth in the first quarter suggested that the domestic economy could accommodate a further tightening of monetary policy settings.

“By taking urgent action, the Monetary Board aims to anchor inflation expectations further and temper mounting risks to the inflation outlook. In particular, policy action is intended to help manage spillovers from other countries that could potentially disanchor inflation expectations,” Medalla said.

The Monetary Board also recommended timely non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices.

“The BSP reassures the public of its unwavering commitment and readiness to take further necessary actions to steer inflation towards a target-consistent path over the medium term in keeping with its price stability mandate,” he said.

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