Philippines to further tighten monetary policy

The Philippine's central bank BSP would continue tightening its monetary policy settings since easing core inflation did not necessarily indicate a rapid decline in headline inflation, reports said on Thursday.
BSP Deputy Governor Diwa Guinigundo said that there were signs that demand pressures are starting to ease, especially since oil and food prices have started coming down, the Philippine Star reported.
The deceleration of core inflation from 6.6 in June to 6.3 in July indicates lower demand pressures, but the early signs were not enough for the BSP to change its baseline forecast nor the view that inflation would peak in October, the official said.
"We will continue to be on a tightening mode until we see that second-round effects have moderated and inflation expectations have gone down resulting in a more favorable inflation outlook," said the official, cited by the Manila Times.
The country's Monetary Board is set to meet on monetary policy on Aug. 28, with the market expecting the BSP to continue raising interest rates until the last quarter of the year to achieve its inflation target of 6 percent to 8 percent next year.
The BSP has raised its key policy rates by 75 basis points in the last two Monetary Board meetings, as inflation accelerated to a 16-year high of 12.2 percent last month. With the adjustment, the central bank's overnight borrowing and lending rates stood at 5.75 percent and 7.75 percent, respectively.
Source:Xinhua