Philippines Central Bank Holds Rate Steady to Tame Inflation, Support Currency

By Kosaku Narioka

The Philippine central bank kept its policy rate unchanged as it continues efforts to tame inflation and support the country's currency.

Bangko Sentral ng Pilipinas Gov. Eli Remolona said Thursday that the central bank maintained its benchmark overnight reverse repurchase rate at 6.50%. It also held its benchmark lending rate steady at 7.00%.

All 10 economists polled by The Wall Street Journal had projected that the central bank would stand pat on its policy rate.

The country's consumer-price index for May rose 3.9% from a year earlier, edging higher from a 3.8% increase in April. That is near the upper end of the central bank's inflation target range of 2%-4%.

The central bank raised its policy rate from May 2022 to October 2023 by a total of 4.50 percentage points to the highest level since 2007, in response to a surge in inflation caused by the Russia-Ukraine war and a recovery from the Covid-19 pandemic.

The Philippine peso was recently at PHP58.80 per dollar after hitting its weakest level since November 2022 on Wednesday.

An early rate cut by the central bank could weaken the peso further and raise inflationary pressure in the economy, some economists have said.

Although central bankers' comments have been turning incrementally dovish in recent months, the Philippines central bank would likely hold off on lowering rates until inflation moderates and the Federal Reserve starts cutting rates, they said.

The country's gross domestic product rose 5.7% in the first quarter from the same period a year earlier, thanks to broad improvements led by services and industry sectors.

Write to Kosaku Narioka at [e-mail]

(END) Dow Jones Newswires

06-27-24 0322ET