The Philippine central bank yesterday raised interest rates for the second time in two months, warning that inflation would breach its target this year with rising commodity prices and fish shortages driving up costs.
The monetary authority hiked its key interest rate by another 25 basis points to 2.5 percent, effective today.
Bangko Sentral Governor Benjamin Diokno said the central bank was prepared to “take all necessary policy action” to bring down inflation over the medium term.
Overnight deposit and lending facilities were raised by the same amount to 2 percent and 3 percent respectively.
The hike comes after inflation hit 5.4 percent last month, the highest level in more than three years as steep oil price increases pushed up food prices and transport costs. Inflation is expected to reach 5 percent this year and 4.2 percent next year, exceeding the central bank’s target range of 2 to 4 percent.
The second consecutive increase enabled policymakers to withdraw stimulus measures while safeguarding economic stability, Diokno said.
Separately yesterday, Norway’s central bank announced a sharper-than-expected interest rate increase, and warned of more hikes to come, as policymakers tighten monetary policies worldwide to fight surging inflation.
The central bank raised its main rate by 0.5 percentage points to 1.25 percent, its fourth hike since September, when it stood at zero.
The previous increases had been of 0.25 percentage points each and few analysts had predicted yesterday’s sharper hike.
“Prospects for a more prolonged period of high inflation suggest a faster rise in the policy rate than projected earlier,” Norges Bank Governor Ida Wolden Bache said in a statement.
“A faster rate rise now will reduce the risk of inflation remaining high and the need for a sharper tightening of monetary policy further out,” she added.
To curb inflation, the bank is to accelerate the tightening of its monetary policy and expects its rate to reach “3 percent in the period to summer 2023.”
The rate is “most likely” to rise to 1.5 percent in August, based on the bank’s “current assessment of the outlook and balance of risks,” Wolden Bache said.
Consumer prices in Norway reached 5.7 percent year-on-year last month and core inflation, excluding energy prices ---- the indicator used by Norges Bank ---- was 3.4 percent, or well above its official monetary policy target of about 2 percent.
However, Turkey’s central bank yesterday once again bucked global trends and kept its benchmark interest rate stable, despite its consumer price index having one of world’s biggest increases.
The decision at a monthly policy meeting came two weeks after Turkish President Recep Tayyip Erdogan — a lifelong opponent of high interest rates — denied that Turkey had an “inflation problem.”
Turkey’s consumer price index has risen more than 70 percent this year, the official government figure shows, but independent estimates by Turkish economists suggest that the real figure could be substantially higher.
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