BSP ready to use 'full force of available measures' after US Fed rate hike

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Metro Manila (CNN Philippines, July 28) — The Bangko Sentral ng Pilipinas gave assurance Thursday it is ready to employ all monetary policy measures to respond to possible risks to local inflation and the peso following the United States Federal Reserve's move to hike interest rates anew.

"In order to manage the spillover effects of such external developments, the BSP is prepared to utilize the full force of available measures in order to address the potential risks to Philippine inflation and inflation expectations arising from an overshooting or excessive depreciation of the Philippine peso," the BSP said in a statement.

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The central bank noted that the Fed's decision to implement a rate hike of three-quarters of a percentage point or 75 basis points is among the external factors that could keep driving foreign exchange movements in emerging economies like the Philippines.

Other developments it cited were the global monetary tightening, and "broadening uncertainty" over the world economy's growth prospects.

The peso weakened to ₱55.82 against the dollar on Thursday from ₱55.68 the previous day — also a depreciation from ₱55.30 on Tuesday.

"At the same time, the BSP will continue to be guided by its assessment of the domestic and global developments that affect the outlook for inflation and growth," the bank's statement read.

The central bank added policy actions in the coming months will be done "commensurate" to its main objective of ensuring inflation won't remain high for long.

"The BSP believes the Philippines' robust economic prospects continue to provide enough room for further tightening of the monetary policy stance," it stated.

BSP Governor Felipe Medalla earlier said surprise rate hikes, like the three-quarters of a point increase announced earlier this month, are off the table. He did hint, though, of a quarter-point (25 basis points) or half-point (50 basis points) increase during next month's policy meeting. 

There are only four scheduled meetings left for 2022: Aug. 18, Sept. 22, Nov. 17 and Dec. 15.