Philippines hikes key interest rate again as inflation accelerates

The Philippines’ central bank on Thursday raised its key interest rate by 25 basis points, to 2.5%, as it strives to temper accelerating inflation.

The move marks the second straight increase for the benchmark, and was in line with expectations, though some observers had predicted an even bigger hike. Last month’s increase, also 25 basis points, was the first since 2018.

The latest rate hike in the Philippines comes as inflation — which has averaged 4.1% from January to May — is expected to climb further. Central bank Gov. Benjamin Diokno said on Thursday that this was due to rising transport fares amid higher oil prices, along with a domestic fish shortage.

The Philippine central bank now expects inflation to hit 5% in 2022 and 4.2% in 2023, breaching its 2% to 4% target.

Thursday’s rate increase also follows the Philippine peso’s decline to its weakest level in 16 years against the dollar, prompting calls for more aggressive tightening. While 16 of 22 economists polled by Reuters had predicted a 25-basis-point increase in the Philippines, six had anticipated a 50-point jump.

Source: NIKKEI Asia

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