Philippine central bank pulls rate trigger as economy booms

Bloomberg

The Philippines became the latest emerging market to raise interest rates, following through with a pledge to curb inflation in a booming economy.
Bangko Sentral ng Pilipinas increased the overnight reverse repurchase rate to 3.25 percent from a record-low 3 percent, it said in a statement in Manila.
Thirteen of 16 economists predicted the decision, with the rest expecting no change.
Central bankers in emerging markets face their toughest test since the 2013 taper tantrum as the dollar strengthens and US Treasury yields climb. Argentina’s central bank raised rates three times to stem a sell-off in its currency while Indonesia is poised to tighten next week.
In the Philippines, the central bank has been focussed on domestic concerns including inflation surging to a five-year high of 4.5 percent — the fastest among Southeast Asia’s main economies — and volatility in the currency. The bank revised its inflation forecasts higher, predicting it will miss the 2 percent to 4 percent target this year.
“The BSP will likely stick to the narrative the pressures are supply-side in nature, a merely transitory phenomenon,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila. “This justifies not being too aggressive as the effectiveness of a rate increase is probably very limited.”