Interest Rate Hike: What’s Going on Now?

Feliz Grace Bueno     June 9, 2022

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Interest Rate Hike: What’s Going on Now?

In May, the Bangko Sentral ng Pilipinas (BSP) hiked the interest rates for the first time since 2018 to help curb inflation. This 25 basis point increase aims to aid the recovering economy that fell short during the rise of the COVID-19 pandemic. 

READ MORE: How the Interest Rate Hike Affects the Construction Industry

As May came to a close, the inflation soared to its highest, moving it further from 2022’s 2% to 4% target band. It also means expectations are pointed towards another key interest rate hike within June. 

From its 4.6% rise in May, it became 5.4% as the month came to a close and June rolled in. 

The increase in food costs and higher transport is the key attribute mainly of inflation. In addition, the conflicts between Russia and Ukraine caused global crude oil prices to become more expensive. It’s also caused produce to become more expensive as well as some vegetables (e.g. potatoes) are becoming scarce. 

Effects of Inflation on Businesses 

As inflation continues to rise, it will affect not only the construction industry but also other businesses as well. 

Apart from materials becoming more expensive, the cost of operating a business will also rise as utilities, including electricity and gas, are expected to become more expensive soon as well. 

It would be a great opportunity for owners to reassess their priorities in running their businesses. It would be a good idea to take into consideration aspects such as labor and materials costs when they’re looking to expand or accept projects in their businesses. 

Future Expectations

The inflation is expected to rise again as the month progresses. It’s expected to rise again by another 25 basis points. It’s best to monitor the rising prices – not just in transportation but also in other utilities including food and electricity. 

The BSP will have a policy meeting in the latter part of June and then again in August. It’s expected that the interest rate will rise again within those dates. 

Citations:

  • Alegado, Siegfrid, and Cecilia Yap. “New Philippine Central Bank Head Signals at Least Two Hikes.” Bloomberg.com, 7 June 2022, www.bloomberg.com/news/articles/2022-06-07/successive-rate-hikes-seen-in-philippines-by-new-monetary-head. Accessed 8 June 2022.
  • Morales, Neil Jerome. “UPDATE 1-Philippines May CPI Hits 3-Year High, Supports Further Rate Hike.” Reuters, 7 June 2022, www.reuters.com/article/philippines-economy-inflation/update-1-philippines-may-cpi-hits-3-year-high-supports-further-rate-hike-idUSL1N2XU01T. Accessed 8 June 2022.
  • de Vera, Ben, and Ronnel Domingo. “May Inflation Rate Heats up to 42-Month High of 5.4%.” INQUIRER.net, 8 June 2022, business.inquirer.net/349873/may-inflation-rate-heats-up-to-42-mo-high-of-5-4. Accessed 8 June 2022.
  • CORDERO, TED. “Inflation Accelerates to 5.4% in May 2022.” GMA News Online, 7 June 2022, www.gmanetwork.com/news/money/economy/834120/inflation-accelerates-to-5-4-in-may-2022/story/. Accessed 8 June 2022.

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