MANILA, Dec. 15 (Xinhua) -- The Philippine central bank on Thursday decided to raise interest rate on the overnight reverse repurchase facility by 50 basis points to 5.5 percent, effective Friday, to combat inflation.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said the Monetary Board also decided to raise the overnight deposit and lending rates to 5 percent and 6 percent, respectively.
The BSP's latest baseline forecasts show that average inflation is still projected to breach the upper end of the 2-4 percent target range at 5.8 percent in 2022 and 4.5 percent in 2023. However, the forecast for 2024 fell to 2.8 percent, owing mainly to the further easing in oil prices, peso appreciation, and the slightly lower domestic growth outlook.
"The Monetary Board arrived at its decision after noting the further uptick in the headline and the sharp rise in core inflation in November amid pent-up demand," Medalla said.
Headline inflation rose in November to 8.0 percent year-on-year, the highest level observed since November 2008, which was mainly attributed to the increase in prices of food items.
Medalla said upside risks continue to dominate the inflation outlook up to 2023 while remaining broadly balanced in 2024. "The expected upside risks to inflation over the policy horizon stem mainly from elevated international food prices due to high fertilizer prices and supply chain constraints."
On the domestic front, Medalla said trade restrictions, increased prices of fruits and vegetables due to weather disturbances, higher sugar prices, pending petitions for transport fare hikes, and potential wage adjustments in 2023 could push inflation upwards.
Meanwhile, Medalla added the impact of a weaker-than-expected global economic recovery continues to be the primary downside risk to the outlook.
Medalla said the BSP stands ready to take all necessary action to bring inflation to within the 2-4 percent government target band over the medium term. ■
