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Bangko Sentral ng Pilipinas (BSP) is expected to continue its
tightening mode to stabilize inflation.
“Monetary policy needs to be appropriately
tight to stabilize inflation to within the target range over the
policy horizon, and to help manage inflation expectations,” BSP
Governor Amando Tetangco, Jr. said.
BSP raised its rates for 25 basis points,
specifically for overnight borrowing rate to 6 percent and overnight
lending rate to 8 percent. So far, the BSP had raised its key policy
rates in a total of 75 basis points.
“We will continue to look at the balance of
risks to the inflation outlook, and take into account the impact of
past policy actions,” Tetangco said.
He said that price stability is essential to
long-term sustainable growth and for effective planning both for the producers
and consumers.
“With greater predictability in the economic
environment, we can expect better-informed investment and
consumption decisions which should lead to a pick-up in demand,”
Tetangco said.
Business as well as consumers can plan better
and with a longer-term mindset when price changes are kept at
manageable levels, the governor said. Tetangco said that the
economic growth has slowed sharply in the second quarter of the
year. He said that the gross domestic product growth of 4.6 percent
is within the long-term trend growth rate, which agriculture and the
growth sectors of mining and business process outsourcing continue
to show resilience.
The Monetary Board hiked its interest rates for
the third time on Thursday and likely to hike rates further before
the end of the year, which the market expects BSP rates to increase
by 50 basis points more.
Frederic Neumann, HSBC economist said in a
statement that the BSP would persist in tightening monetary policy,
likely exceeding its original year-end forecast for the policy rate
of 6 percent by some 50 basis points due to ongoing pressure on the
peso.
BSP has forecast inflation to reach 9 percent to
11 percent this year and 6 percent to 8 percent next year.
Tetangco said there is a declining trend of oil
and food prices, which should moderate inflation pressures.
Tetangco earlier said inflation would likely
reach 11.8 percent to 12.6 percent in August from 12.2 percent in
June due to rising cost of raw materials for food production.
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