Philippines central bank flags 4th rate hike to fight inflation, help peso

September 19, 2018 - 9:00 AM
(Philstar/File photo)

MANILA — The Philippine central bank signaled a fourth hike in its benchmark interest rates this year, a central bank official said on Tuesday, as policymakers boost efforts to tame a nearly decade-high inflation and support the local currency.

“We have to deliver a very strong rhetoric about having a strong follow through (policy action),” central bank Deputy Governor Diwa Guinigundo told a media briefing.

“Whether it’s 25 basis points or 50 basis points that would be determined by the data that would come out between now and the Sept. 27 meeting of the Monetary Board.”

The central bank’s policy-making Monetary Board meets next on Sept. 27 after raising its benchmark rates at the past three meetings, by a total of 100 basis points.

Annual inflation hit 6.4 percent in August, the highest since March 2009, prompting Bangko Sentral ng Pilipinas Governor Nestor Espenilla to say earlier this month that the monetary authority’s most crucial task at this stage was to bring inflation back within its 2-4 percent target range.

Consumer prices have been under pressure in part due to the weaker peso, which is languishing near a 13-year-low against the U.S. dollar.

“We need to maintain the credibility of monetary policy. We need to deal with the depreciation of the peso because it has some inflationary pressures moving forward,” Guinigundo said.

“We cannot be indifferent to an excessive swing in the exchange rate because that would affect the inflationary expectations of the general public.” — Reporting by Enrico dela Cruz; Writing by Manolo Serapio Jr.; Editing by Gopakumar Warrier