Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla said the board decided to keep inflation expectations from spiking and risking an upward spiral in consumer prices, which rose to their highest in five years in May.
MANILA: The Philippine central bank raised its benchmark interest rate on Wednesday, for the second time in six weeks, and said it was ready to take further action to tame inflation and the volatility in the peso.
The policy-making Monetary Board hiked the overnight borrowing rate by 25 basis points to 3.5 percent, following up on a rate increase in May which was the first in more than three years.
The decision was a close call with only seven of 12 analysts in a Reuters poll predicting a hike. The rest had expected rates to be kept on hold.
"The BSP is prepared to take further policy action as needed to achieve its price and financial stability objectives," the central bank said in a statement.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla said the board decided to keep inflation expectations from spiking and risking an upward spiral in consumer prices, which rose to their highest in five years in May.
"Elevated expectations for 2018 highlight the risk posed by sustained price pressures," Espenilla told a news conference.
The central bank revised downwards its average inflation forecast for this year to 4.5 percent from an earlier estimate of 4.6 percent. It also lowered its average inflation projection for next year to 3.3 percent from 3.4 percent.
Annual inflation quickened much less than expected in May, but the 4.6 percent print was still the fastest in at least five years, and marked the third straight month that it breached the central bank's 2-4 percent target for the year.
The peso has declined the most against the dollar so far this year compared with its regional peers, hurt by higher U.S. interest rates and the Philippines' import-driven trade deficit. - Reuters
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