*
Rate increase brings to 425 bps total rate hikes since May
*
BSP revises down 2023, 2024 inflation forecasts
*
Central bank says next policy move will be data dependent
(Updates with governor comments, market reaction, analyst)
By Neil Jerome Morales and Enrico Dela Cruz
MANILA, March 23 (Reuters) - The Philippine central bank
stayed in an inflation-fighting mode on Thursday, raising its
benchmark interest rate by 25 basis points to 6.25%, but said
its next policy decision will depend largely on how consumer
prices behave in the coming months.
The quarter-point hike, which was predicted by all but one
of 24 economists in a Reuters poll, brought to 425 basis points
the total tightening the central bank has delivered since May.
"The Monetary Board's decision was based on the sum of new information and its assessment of the effects of past policy actions, which warranted a continuation of monetary tightening to anchor inflation expectations," Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla told a media briefing. While reiterating the Philippine banking system's resilience, Medalla said the rate hike was warranted to "preserve the buffer against external spillovers" from stresses in the financial systems of advanced economies. "The BSP continues to keep a watchful eye over developments in the international banking industry," Medalla said. The banking sector has been in turmoil since the collapse of two mid-sized U.S. banks earlier this month, which prompted a rout in banking stocks and led to a takeover of 167-year-old Credit Suisse by its Swiss rival UBS .
The peso firmed 0.1% to 54.33 against the U.S. dollar as of 0805 GMT after the BSP's policy announcement, while Philippine shares closed 0.15% lower on Thursday. The central bank revised down its forecasts for inflation this year and next and reiterated it was prepared to act if needed to slow the pace of consumer price increases to within its 2%-4% comfort range.
After annual inflation slightly eased to 8.6% in February, the central bank now expects inflation to average 6.0% in 2023 and 2.9% in 2024, compared with 6.1% and 3.1% predicted previously.
"In the past, we were more or less assured that there will be another increase, now clearly it really depends on the data," Medalla said. ING Economist Nicholas Mapa said after Thursday's policy decision the central bank may pause its policy-tightening cycle in May barring supply-side shocks.
The Philippine central bank's rate move followed the Fed's
quarter point rate rise coupled with a warning that the banking
industry stress could trigger a credit crunch.
While the U.S. Federal Reserve's rate actions "may be
relevant" in the policy decision of the Philippine central bank,
its future policy action "really depends on what happens to our
assessment of the inflation," Medalla said.
(Reporting by Neil Jerome Morales and Enrico dela Cruz; Writing
by Karen Lema; Editing by Ed Davies and Tomasz Janowski)
