BSP raises rates on elevated inflation and robust economic growth

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The Bangko Sentral ng Pilipinas (BSP) raised rates on Thursday, May 10, marking the first tightening move in nearly four years at a time of five-year highs for inflation and robust economic growth.

The Monetary Board raised policy settings by 25 basis points during their third review for the year. Rates now stand at 3.75% for the overnight lending rate, 3.25% for the overnight reverse repurchase rate, and 2.75% for the overnight deposit rate.

“In deciding to raise the policy interest rate, the Monetary Board noted that latest forecasts have furhter shifted higher, indicating that inflation pressures  could become more broad-based over the policy horizon,” BSP Governor Nestor A. Espenilla, Jr. said during Thursday’s briefing.

The BSP last hiked policy rates in September 2014, at a time when inflation was trending above their 3-5% target that year.

The central bank’s decision fulfilled mounting calls for a rate hike. Last week’s BusinessWorld poll showed that nine of 11 economists have priced in higher rates during this week’s meeting.

Central bank likely to hike key rates
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• Analysts’ Expectation on Policy Rates