Philippines central bank raises overnight policy rates to stifle inflation

By on September 11, 2014

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MANILA, Philippines—The Philippine central bank raised key interest rates by a quarter percentage point Thursday for the second time in six weeks to stifle inflation.

The bank’s Monetary Board raised the rate it charges commercial banks for overnight borrowing to 6.0 per cent and the rate it pays lenders for overnight deposits to 4 per cent.

Deputy Governor Diwa Guinigundo said the decision was made because forecasts put next year’s inflation rate at 3.8 per cent, close to the upper end of the bank’s 2-4 per cent target range. The bank forecasts an inflation rate of 4.5 per cent this year.

Possible increases in food prices due to tight domestic supply, a pending petition for utility rate increases and potential power shortages could push inflation higher, he added.

Guinigundo also said the rate increase is a “pre-emptive move” in the context of the U.S. looking like it will tighten its currently loose monetary policy.