MANILA -- The Philippine central bank on Thursday hiked its policy rate to its highest level in almost a decade in a bid to stem inflation and provide support to the local currency.
At its sixth meeting this year, the Bangko Sentral ng Pilipinas raised its benchmark rate by 50 basis points, to 4.5%, its highest mark since March 2009. The BSP said another strong monetary response was necessary to rein in inflation expectations and keep suppliers from passing along rising costs.
BSP Deputy Gov. Chuchi Fonacier said the policy rate hikes in 2018 "was warranted amid persistent signs of broadening price pressures" and ease the pressure on the Philippine peso.
The BSP has cumulatively raised interest rates by 150 basis points this year, after nearly four years of keeping a steady policy hand.
Inflation in the Philippines hit 6.4% last month, the highest rate in almost a decade, as food and oil prices soared. The peso, meanwhile, is at its weakest point against the dollar in 13 years, dropping to P54.33 on Wednesday, a day before the BSP hiked rates.
President Rodrigo Duterte's "Build, Build, Build" infrastructure program and the growing domestic economy has widened the country's trade deficit to $22.49 billion, 72% higher on the year, and led to the peso's depreciation against the greenback.
Under pressure, the central bank had considered an extraordinary meeting ahead of today's regular policy assessment.
The BSP expects inflation to breach the central bank's 2-4% target range this year and in 2019.
Prices could remain elevated in the wake of Typhoon Mangkhut, which earlier this month pummeled the country's northern regions and damaged an estimated 27 billion pesos ($497 million) worth of agricultural goods.
Nicholas Antonio Mapa, economist at ING Bank N.V. Manila said the BSP will likely need to remain hawkish even after the Thursday rate hike as inflation expectations remain elevated.
"BSP is likely to hike at least one more time before the close of the year," Mapa said.
Duterte took his own steps to curb inflation ahead of the central bank meeting. In an administrative order made public on Tuesday, Duterte ordered the Trade Department, National Food Authority and Sugar Regulatory Administration to ease restrictions of food imports, lift nontariff barriers and make commodities immediately available to consumers.