By Ben Otto
The Philippine central bank followed through on plans to raise interest rates in line with the recent Federal Reserve increase, part of efforts to protect the peso and rein in inflation near a 14-year high in the Southeast Asian nation.
The Bangko Sentral ng Pilipinas said Thursday that it will increase its benchmark overnight borrowing rate by 75 basis points to 5.00%, effective Friday, and its corresponding lending rate by the same amount to 5.50%. The borrowing rate will hit its highest level since 2009.
Governor Felipe Medalla earlier this month signaled his intention to match a recent rate increase by the Fed to mitigate any impact on exchange rates and to help ensure price stability. He said Thursday that he felt that guidance had helped the peso, noting some appreciation of the local currency against the dollar this month.
The bank said Thursday that its decision to raise rates was due to factors including an upward revision to inflation forecasts both this year and next. The country’s consumer-price index hit a nearly 14-year high in October, rising 7.7% from a year earlier–well above the central bank’s inflation target of 2%-4%–and quickening from 6.9% inflation posted in September.
Officials also cited a need for a robust policy response to “help against spillovers from tightening global financial conditions.”
The central bank has now raised its policy rate by 3.00 percentage points since May, when it lifted the rate for the first time in three-and-a-half years.
The country’s gross domestic product expanded 7.6% in the third quarter from a year earlier, up from 7.5% growth in the second quarter.
Write to Ben Otto at email@example.com