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Philippine central bank hikes interest rates by another 50 basis points on Thursday

Shaloo Shrivastava

BENGALURU (Reuters) – The Philippine central bank may choose to raise interest rates by 0.5 percentage points on Thursday to support currency depreciation and reduce its impact on imported inflation, A Reuters poll of economists showed.

The Philippine Peso is down more than 11% this year as one of Asia’s worst performing currencies. Its poor performance against the dollar, underpinned by an aggressive Federal Reserve rate hike 75 again on Wednesday, has led to a record trade deficit and higher inflation.

To support the currency and curb inflation, the Bank of the Philippines (BSP) has raised its policy rate by 175 basis points since May.

more than 60% of economists surveyed, or 17 , the benchmark is expected to rise 25 to 4 on September 2. 25 %. 22 meeting, while the first half of economists forecast 4.% rounds inquiries. If realized, this would push borrowing rates to their highest level since August 2019.

Six now expect a quarter-point increase to 4. 00%, with one predicting a huge 75 basis points to 4.17% and solo in mid-September -19 Polls expect BSP to take no action.

Pressure on the Philippines (balance of payments) continues to put pressure on PHP,” ANZ economist Debalika Sarkar said, referring to the peso currency.

“So it can be Imagine that rate hikes will need to be more aggressive to minimize foreign exchange volatility and pass-through to domestic prices. ”

exceeds 25%, or 17 of 19, forecast to end the year at 4.25% or higher – also the expected peak for this cycle – 22 The base points are higher than the last poll. Eight said 4.25% and four said 4.60%. The remaining four digits represent 4.25% or less.

Although inflation fell to 6.3% in August, it has yet to peak from a four-year high of 6.4% in July, leaving room for further rate hikes, analysts said. The target is set at 2-4%.

“The central bank’s strong measures to bring future rate hikes forward to the September meeting will not only reduce upside risks to inflation, but also strengthen the central bank’s commitment to bringing inflation back to target. Credibility and commitment,” said DBS economist Han Teng Chua.

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