Plot twist from the Bangko Sentral.
On Thursday, October 22, the Bangko Sentral ng Pilipinas (BSP) raised its key interest rate by 50 basis points to 5.50%. Most analysts were expecting just 25. In a BusinessWorld poll, only 2 of 22 got it right.
Why so big?
Prices are running hot. Inflation hit 7.2% in September, up from 6.1% in August and the highest in three years. It's been above the BSP's 2% to 4% target for seven straight months.
BSP Governor Eli Remolona Jr. said inflation could climb even higher in the coming months because of oil prices and transport fares. His honest take: "The numbers we were looking at, the forecasts, were worse than we thought."
The numbers
Policy rate: 5.50% (from 5.00%)
Overnight deposit rate: 5.00%
Overnight lending rate: 6.00%
Total hikes this year: 125 basis points over four straight meetings
What it means for you
Loans: Car loans, housing loans and business loans may get more expensive in the coming months as banks adjust their rates.
Credit cards: Pay your balance in full if you can. Carrying debt is getting costlier.
Savings: The upside is that deposit and time deposit rates may inch up too.
And the peso?
The peso closed at P63.52 to the dollar after the announcement, its third record low in a row, according to the Daily Tribune. But Remolona was clear: "We're not hiking the policy rate to defend the peso." The goal is taming prices.
What's next
The BSP meets one last time this year on December 17. Will there be another hike? Remolona isn't ruling it out: "I can't say whether it will be 50 or 25 or bigger."
