Central Bank Interest Rate Hike in the Philippines

July 31, 2014

The Filipino key borrowing and lending rates were increased today by 25 basis points each to 3.75% and 5.75%.  Opinion ahead of the Monetary Board meeting and Bangko Sentral ng Pilipinas had been mixed between those anticipating the tightening and those looking for no change.  The move was described in a released statement as “preemptive” in light of somewhat higher expected inflation.  Inflation of 4.4% as of June lies near the top of the central bank’s 2-4% target.  Another explanation for today’s action is the unavoidable eventual need for some policy normalization.  Reserve requirements, which were raised in May and the special deposit account, which went up in June, were not changed further.  The last interest rate increase occurred in May 2011.  In between, the lending and borrowing rates were cut four times in 2012 but not changed in 2013.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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