Philippine central bank hikes overnight borrowing rate by 25 bps, likely to hike again in August

The Philippine central bank hiked its overnight borrowing rate today by 25 basis points to 3.25 percent, consistent with market expectations. The overall interest rate corridor was also hiked by a similar magnitude.

The Philippine central bank also raised its inflation forecast for this year to 4.6 percent from its previous forecast of 3.9 percent. The BSP expects inflation to average 3.4 percent next year, as compared with its prior expectation of 3 percent. The BSP also stated that it continues to be vigilant about the second-round impact of the tax reforms and sees upside risks to inflation. Higher crude oil and rice prices were seen as the significant risks. On the growth front, BSP was of the view that it is unlikely to be derailed by today’s hike.

“We believe that one rate hike will not be sufficient to address these issues. Accordingly, we now expect one more hike of 25bps in August”, added ANZ.

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