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THE
Bangko Sentral ng Pilipinas (BSP) raised its policy
rates 50 basis points higher on Thursday instead of the
25-basis-point adjustment seen by consensus.
This
brought its overnight borrowing and lending rates to
5.75 percent and 7.75 percent, respectively.
It was
the biggest rate hike since 2002, when the central bank
first adopted the inflation-targeting approach.
Deputy
BSP Governor Diwa Guinigundo said the
higher-than-consensus adjustment was meant to address
the threat posed by inflation, seen to average more than
12 percent around October this year.
As a
result, the BSP also adjusted to a higher plane the
forecast inflation this year, originally ranging from 7
percent to 9 percent, to 9 percent to 11 percent
instead, Guinigundo said.
For
2009, the original forecast range of 4 percent to 6
percent was recast to a range of 6 percent to 8 percent.
“The
adjusted forecast inflation rates do not include the
[mitigating] impact of the 50-basis-point policy- rate
hikes,” Guinigundo stressed.
“The
thrust is to bring inflation this year and in 2009
closer to the target 3- percent to 5-percent average
inflation in 2009, and target 2.5-percent to 4.5-
percent average inflation in 2009,” he added. BSP
Governor Amando Tetangco Jr. noted that “concurrent and
interrelated shocks to the economy, such as the
persistent surge in oil prices and spikes in commodity
prices, (to) have contributed to elevated inflation
readings.”
Tetangco
also said second-round effects such as higher transport
fares and wages have set in, as clearly discernible in
the rise in core inflation.
Distinguished from headline inflation, core inflation
excludes the price of volatile oil and food prices from
the consumer price index.
Both
Tetangco and his deputy agree that inflation should
moderate in the fourth quarter after peaking at over 12
percent around October.
“Price
pressures have increased even as they are projected to
ease starting late 2008,” Tetangco said.
“Sustained high inflation can unseat inflation
expectations and potentially create a repeating cycle of
lingering inflation and wage pressures that could prove
costly to the economy.
“By
responding promptly to inflation risks, the BSP intends
to reduce the risks to inflation expectations and the
long-term cost to output growth from prolonged high
inflation.
“Authorities believe that the series of policy
adjustments will help steer inflation toward its desired
path for the medium term,” Tetangco said.
Relatedly, President Arroyo said on Thursday that the
Philippines is better off than other countries in terms
of inflation, and that the government has acted to
prevent any undue price increases.
The
President said in a radio interview that government
efforts have helped “temper” inflation in the country,
which hit double-digit in June, the highest since 1994,
because of soaring oil and food prices.
“Our
inflation has been tempered by our reforms. The way we
have been addressing oil prices, rice prices, especially
subsidized rice and the distribution network, has helped
bring down rice prices. It reached P40 [per kilo] in
other countries but here it’s just P35. This is the
result of our efforts,” she said.
While
inflation rose in the country—11.4 percent in June this
year compared to the previous year—other countries are
experiencing even higher inflation levels.
“In
fact, the inflation rates in other countries are worse
than ours. We continue to address this problem to keep
the purchasing power of consumers from shrinking too
much,” Mrs. Arroyo said.
The
President appeared unfazed about the state of the peso,
which has weakened to P45 to $1 from around P40 earlier
this year, and said, when asked about it, that this was
just caused by higher oil and rice imports. (With Mia
Gonzalez) |
