MANILA: In a bid to combat inflation, the central bank of the Philippines agreed on Thursday to increase the interest rate on the overnight reverse repurchase facility by 25 basis points to 2.5% as of Friday.

According to Benjamin Diokno, governor of the Bangko Sentral ng Pilipinas (BSP), the Monetary Board also voted to increase the interest rates on the overnight deposit and loan facilities to 2.0% and 3.0%, respectively.

In a press conference, Diokno said, "The Monetary Board noted that upside risks continue to dominate the inflation outlook up to 2023, with pressures emanating from the potential impact of higher global non-oil prices, the ongoing scarcity of domestic fish, and the pending petitions for transportation fare increases due to elevated oil prices." He added that the biggest dangers to the outlook remain the effects of a weaker-than-anticipated global recovery and the potential reimposition of local Covid-19 pandemic limitations amid an increase in infections.

The average inflation rate is now expected to be 5.0 percent in 2022 and 4.2 percent in 2023, according to the BSP's most recent baseline predictions. In addition, increased expectations emphasise the danger of additional second-round effects resulting from prolonged pricing pressure, according to Diokno, who also noted that inflation expectations have continued to climb.

In order to fulfil its primary mandate of price stability, he claimed that the BSP is ready to implement all necessary policy measures to steer inflation toward a target-consistent path over the medium term.

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