The Philippine central bank has made the unexpected decision to raise its benchmark interest rate in response to high inflation rates. Bangko Sentral ng Pilipinas Governor Eli Remolona announced on Thursday that the overnight reverse repurchase rate would be increased by 25 basis points to 6.50%, effective from Friday.
This off-cycle action was taken due to the clear and immediate need to address the rising inflation. In September, the country’s consumer-price index saw a 6.1% increase compared to the same period last year, surpassing the central bank’s target range of 2%-4% and the previous month’s rise of 5.3%.
According to Remolona, several factors contribute to the upward pressure on inflation, including higher transportation costs, electricity rates, and international oil prices. Despite these challenges, he stated that the Philippines’ medium-term growth outlook remains largely unaffected.
During the second quarter of this year, the country’s gross domestic product experienced a 4.3% year-on-year growth. However, on a seasonally adjusted basis, it saw a 0.9% decline from the previous quarter.
It is clear that the Philippine central bank is committed to maintaining stability in its economy and controlling inflation by taking proactive measures.