BSP to match Fed policy tightening with 75 basis point hike at next meeting

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The Bangko Sentral ng Pilipinas (BSP) is expected to raise its policy rates an additional 75 basis points this month to match the recent tightening in the United States, as inflation hit historic highs in October.

According to BSP Governor Felipe Medalla, the Federal Reserve’s policy tightening supports the local central bank’s stance to raise local rates by the same amount at its next policy meeting on Nov. 17.

“By matching the Fed’s rate hike, BSP reiterates its firm commitment to its mandate of maintaining price stability by aggressively addressing inflationary pressures arising from local and global factors,” Medalla said in a message. to journalists.

“BSP deems it necessary to maintain the interest rate differential in effect before the last Fed rate hike, in line with its price stability mandate and the need to mitigate any impact on the country’s exchange rate. the latest Fed rate hike,” he said. added.

Medalla clarified that the planned hike will not be off-cycle as it will come into effect after the meeting scheduled for Nov. 17, consistent with earlier statements that there will be no more off-schedule policy moves.

The the central bank expects inflation to have stabilized between 7.1% and 7.9% in Octoberwhich would exceed the government’s target range for the seventh consecutive month if achieved.

The latest BSP outlook indicates that inflation is expected to average 5.6% this year, 4.1% in 2023 and 4.0% in 2023.

It raised rates by 50 basis points in September, bringing the overnight repo facility rate to 4.25%, the overnight deposit facility rate to 3.75% and the rate on the overnight loan facility at 4.75%.

Previously, she had increased her rates of 50 basis points in August, 75 basis points during an off-plan hike in July, and 25 basis points each in June and May.

“BSP remains vigilant in monitoring all risks to the inflation outlook and stands ready to take the necessary policy actions to bring inflation back to a path in line with the target,” Medalla said. —News KBK, GMA

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