The Philippines raises interest rates 75 Basis Points

The Central Bank of Philippines (BSP) is set to raise interest rates by 75 basis points at today’s policy meeting.

The economic trajectory in the Philippines is looking dire with inflation peaking at 5.1% in September for the 2022 fiscal year. The BSP introduce several interest rate hikes this year to return domestic inflation back to a comfortable 2-4%. Increased government spending, reliance of imported raw fuels and produce, and a volatile political environment have exacerbated inflation hikes beside a weakening dollar-peso exchange rate. Accelerating crude oil import costs have further added to economic strains. As distancing of the US dollar can jeopardize domestic prices on fuel and raw goods import costs, the BSP is set to match USA Federal Reserve rates in order to tighten dependable inflation surges.

Given the US Federal Reserve is expected to maintain interest rates increases to 3.4% by the end of the year, it is likely the BSP will continue to follow suit for the remainder of 2023 to alleviate conversion rate differentiation. The anticipated 75 basis point increase to overall living costs will likely occur alongside the Philippine’s string of historical increases to peso interest rates earlier this year.