MANILA – In what it termed as a bid to temper high prices and prop the peso up against the US dollar, the Bangko Sentral ng Pilipinas (BSP) delivered a strong policy by jacking up the cost of borrowing by 75 basis points (bps) or three-quarters of a percentage point, thus matching the US Federal Reserve’s aggressive stance against high inflation rate.
This bumps up the key interest rate to 5%, effective Friday, Nov. 18. The increase comes after the 50-bp hike in September.
The Monetary Board, at the same time, raised interest rates on overnight deposit and lending facilities to 4.5% and 5.5%, respectively.
Higher interest rates impact consumer loans, credit card, and deposit interest. This means Filipinos wanting to own cars, houses, or avail of business capital, among others, would have to deal with more costly borrowing.
In turn, businesses and consumers are seen to spend less.
In a briefing, BSP Governor Felipe Medalla, who chairs the Monetary Board, said imposing a higher interest rate would help the peso, which has been depreciating against the greenback to as low as ₱59:$1 in October.