Philippine Central Bank Hikes Policy Rate By 25 Basis Points Inflation Expected To Reach 6.3%

(MENAFN- Khaleej Times) The Philippine central bank hiked its key interest rate to 4.50 per cent on Thursday to keep a lid on rising inflation, with concerns over spiralling fuel costs overriding the need to keep growth on track.

The Bangko Sentral ng Pilipinas (BSP) said inflation is expected to reach 6.3 per cent this year, and governor Eli Remolona warned that more hikes could follow, with the country's easing cycle now over.

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"I think further rate hikes are part of the calculation, but of course it will always depend on what data we see next," he said at a press conference.

In an April 15-20 poll, 14 out of 26 economists expected no change in the overnight borrowing rate, while a strong minority of 12 predicted a 25-basis-point increase.

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Remolona said the decision made on Thursday was not unanimous, but reflected "a good consensus". The central bank held an off-cycle meeting on March 26, becoming the first central bank in Asia to do so, reflecting heightened concerns about the impact of the Middle East conflict on inflation and economic growth.

At that meeting, the central bank left policy rates steady, warning that tighter policy could "delay the recovery" of an economy projected to grow 4.4 per cent this year, while signalling its readiness to act if inflation expectations slipped.

Inflation rose to 4.1 per cent in March from February's 2.4 per cent, the fastest pace in 20 months, breaching the BSP's 2 to 4 per cent target, due largely to double-digit increases in gasoline and diesel prices.

Philippine President Ferdinand Marcos Jr, who declared a state of national energy emergency last month, has suspended the collection of excise taxes on kerosene and liquified petroleum gas, widely used for cooking, to help cushion households from soaring costs.

SP Global and Fitch have cut the Philippines' sovereign outlook, citing heightened risks to the fuel-import-dependent economy from the war in the Middle East.

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