The Bangko Sentral ng Pilipinas on Thursday raised the benchmark interest rate by another 50 basis points to tame inflation which it said would likely keep accelerating.
The move brought the overnight rate, used by banks to price their loans, to 3.75%. it followed an off-cycle increase of 75 basis points last July.
Raising interest rates will decrease demand for debt and slow spending, thus putting the brakes on inflation that has overshot both government market forecasts.
Bangko Sentral ng Pilipinas Governor Felipe Medalla said Thursday inflation would likely keep accelerating and could peak either by October or November. Finance Sec. Benjamin Diokno said on Wednesday that the consumer price index likely peaked in July.
"We think the recovery of the economy is robust enough to absorb further tightening," he said.
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Inflation quickened to a fresh high of 6.4% in July driven by high food prices and transport costs. Economic growth meanwhile slowed to 7.4% in the second quarter from 8.2% the previous quarter.
Diokno on Wednesday said inflation would likely slow towards the end of 2022 and expressed confidence that the Philippine peso will return to the P55-level against the U.S. dollar by the end of the year.
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