Phl hikes key policy rates

MANILA, Philippines (Xinhua) - Monetary officials today raised key policy rates for the first time since 2011 to ensure that inflation this year and in 2015 will remain within target.

The Monetary Board decided to hike key policy rates by 25 basis points to 3.75 percent for the overnight borrowing or reverse repurchase facility and to 5.75 percent for the overnight lending or repurchase facility.

"The Monetary Board's decision is a preemptive response to signs of inflation pressures and elevated inflation expectations," said Philippine central bank governor Amando Tetanco, Jr. in a press briefing.

"The increase in policy rates is also a preemptive measure in the context of the eventual normalization of monetary policy in some advanced economies," Tetangco added.

Inflation is now projected to average 4.33 percent this year from a previous forecast of 4.4 percent, while the 2015 average is expected to hit 3.72 percent from an earlier projection of 3.65 percent.

These are still within the 3 to 5 percent target for this year and the 2 to 4 percent range for 2015.

For 2016, the Philippine central bank projected inflation to average 2.8 percent, near the high-end of the 2 to 4 percent target.

"The balance of risks to the inflation outlook continues to be tilted toward the upside, with price pressures emanating from higher food prices, short-term volatility in international oil prices, and pending petitions for adjustments in power rates and transport fares," said Tetangco.

Key policy rates were last tweaked in October 2012, when the overnight borrowing and overnight lending rates were cut by 25 basis points to record lows.