In a move to combat rising inflation rates, the Central Bank of the Philippines (BSP) has raised its policy rate by 0.50% to 6%, as expected. This decision was made at the BSP’s meeting on February 16 and is part of a continuing effort to control inflation, which recently hit its highest level in 14 years.
The BSP began implementing strict financial controls last year and has so far raised interest rates by a total of 4%. This latest hike is in line with analysts’ expectations and is aimed at addressing inflationary pressures, which have been driven by surging housing, utilities, and food costs.
In January, Philippine inflation reached 8.7%, the fastest rate of increase since November 2008. The BSP’s inflation target range is 2% to 4%, making the current rate of inflation significantly higher than the desired level.
To help address supply shortages and rising prices, Philippine President Ferdinand Marcos Jr. recently approved the importation of additional agricultural products such as sugar and onions.
While the BSP’s latest policy rate increase is expected to help curb inflation, some economists have expressed concern that it could also slow down the country’s economic recovery from the COVID-19 pandemic. Nevertheless, the BSP has stated that it remains committed to its inflation target and will continue to monitor market conditions closely to determine whether additional policy measures are needed in the future.
Overall, the BSP’s decision to raise the policy rate is viewed as a necessary step to address the current inflationary pressures and ensure that the Philippine economy remains stable and resilient.