Philippines stands pat on rate as inflation flares, peso weakens

THE Philippine central bank kept its benchmark interest rate unchanged at a 17-year-high amid resurgent inflation and recent decline in the peso.

The Bangko Sentral ng Pilipinas left the target rate at 6.50 per cent for a fourth straight meeting on Monday (Apr 8), as expected by all 19 economists in a Bloomberg survey.

The pause comes despite headline inflation accelerating for a second consecutive month to 3.7 per cent in March on costlier food, including rice. The latest print is still within the central bank’s 2 per cent-to-4 per cent target, and gives the monetary authority reason to exercise caution on borrowing costs, with price pressures seen persisting until next quarter.

The peso has also faced a fresh bout of weakness along with other regional currencies, giving the central bank more reason to stand pat. The local currency, which touched a five-month low last week, was little changed against the dollar after the noon break on Monday.

There’s been growing wariness among central banks that inflation may continue to be stubborn this year, as the El Nino drought hits farm output and geopolitical tensions push up oil prices. US policymakers have also signalled they are willing to wait for more evidence of decelerating inflation before acting, spurring weakness in emerging currencies that could stoke import costs.

The Philippines imports almost all its fuel needs and is among the world’s biggest buyers of rice. BLOOMBERG