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Philippine raises key rate for first time since 2018



The Philippine central bank raised its key interest rate for the first time since 2018
to combat Southeast Asia’s second-fastest inflation.
Bangko Sentral ng Pilipinas increased the benchmark rate by 25 basis points to 2.25%, it said in a statement, as forecast by 14 of 21 economists in a Bloomberg survey. The rest saw no change.
Philippines joined global central banks in battling price pressures fanned by the war in Ukraine and supply disruptions from virus lockdowns in China, while hinting that the pace of tightening may be gradual compared to most peers. The Federal Reserve hiked its key rate by half-point earlier this month and signalled more, while the Indian central bank raised borrowing costs by 40 basis points.
“The pace and timing of further monetary policy actions by BSP shall be guided by data outcomes,” Governor Benjamin Diokno said. He described
the increase as “timely” and
one that will help arrest the
second-round inflation effects. Consumer price inflation is currently at 4.9%, well above central bank’s 2%-4% target band.
Inflation expectations have risen as second-round inflation effects — including wage hikes in some regions — have emerged, the governor said. Risks to price growth is on the upside for this year and the next, he said. Diokno also announced shifting pandemic-era bond buying window to a regular facility to manage money supply.
BSP needs to make facility more active, where it will determine the amount and tenor of bonds to be bought or sold, Deputy Governor Francis Dakila said. This will “strengthen the government securities window’s effectiveness as a tool for liquidity provision or absorption.”

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