Singapore, Philippines tighten monetary policy on inflation fears | Financial Markets

The moves come after South Korea and New Zealand raised interest rates a day earlier.

The central banks of Singapore and the Philippines unexpectedly announced tightening monetary policy in the latest sign of rising inflation concerns in Asia Pacific.

Bangko Sentral ng Pilipinas (BSP) raised its benchmark interest rate by 0.75 percentage points in an unscheduled rate hike on Thursday, as the central bank signaled it was ready to take further action to resolve increase inflation.

This rate hike brings the overnight lending rate to 3.25%, after two consecutive rate hikes of 0.25 percentage points in May and June.

The tightening comes in the run-up to the BSP’s regular policy meeting scheduled for August 18.

“In raising policy rates once again, the Monetary Board finds that a substantial further tightening of monetary policy is warranted by signs of sustained and extended price pressure amid Normalization of monetary policy settings is underway,” BSP Governor Felipe Medalla said, adding that the central bank was ready to take “further actions necessary to steer inflation in a consistent direction.” medium-term goals”.

“Saying this is an unusual move by the BSP, as they are among the most dovish and reluctant hikers,” said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA. in Asia”.

“The US Consumer Price Index and the MAS move today, coupled with the relentless pressure on the Philippine Peso has shaken the hand of the BSP, creating pressure that Asia central banks are currently under. must face to face”.

Singapore’s central bank also tightened monetary policy in an unexpected move, sending the Singapore dollar 0.7 percent higher.

The move is the fourth tightening in nine months by the Monetary Authority of Singapore, which manages monetary policy through setting the exchange rate instead of interest rates due to the large trade flows between the city and the country. state.

The moves by the Philippine and Singaporean authorities come a day after the central banks of South Korea and New Zealand raise their benchmark interest rate half a percentage point.

In the US, the Federal Reserve is widely expected to release a historic 1 percentage point rate hikes this month, after last month’s inflation hit a new four-decade high of 9.1%.

Inflation in the Philippines hit a nearly four-year high in June and is widely expected to exceed the target of 2-4% for the year.

Singapore’s central bank expects core inflation in the range of 3-4% for the year, up from a previous forecast of 2.5-3.5%.

The central bank also predicts Singapore’s gross domestic product (GDP) growth to come in at a 3-5% lower than forecast after preliminary data on Thursday showed Singapore’s GDP grew by 4.8% in the year-to-date. second quarter, lack of forecast.

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