Policy rates hiked

PHILIPPINES - In Brief 31 Jul 2014 by Romeo Bernardo
After holding policy rates steady since October 2012, the BSP today raised its overnight borrowing and lending rates by 25 bp to 3.75% and 5.75%, respectively. It explained the rate hike as a "preemptive move" to safeguard 2015 inflation which it forecasts to reach 3.7%, near the upper end of its 2-4% inflation target. The runup in food prices in recent months has pushed up headline inflation to 4.4% in June with most analysts expecting supply factors to keep price increases up. The BSP expects the rate increase to help anchor inflation expectations as well. The announced rate hike came late in the afternoon after markets closed. Local treasury yields were mostly up at the end of trading today with the 1M and 3M rates rising 12.5bp and the 10Y up 7.5bp. The peso depreciated slightly while the main stock index ended flat.

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