By BLOOMBERG

MANILA • The Philippine central bank raised its benchmark interest rate for a fifth straight meeting to curb inflation, joining Indonesia in tightening monetary policy yesterday.

Bangko Sentral ng Pilipinas increased the overnight reverse repurchase rate by 25 basis points (bps) to 4.75%, the highest since 2009, it said in a statement in Manila. Rates have been raised 175bps since May, among the most aggressive tightening action in Asia.

“The Monetary Board believes that prospects for the domestic economy remain generally favourable and allow some scope for a measured adjustment in the policy rate to rein in inflation expectations and preempt further second-round effects,” the central bank said.

The proactive policy action will help temper the risks to the inflation outlook, including uncertainty in the external environment amid tighter global financial conditions and trade tensions, the central bank said.

Eleven of 19 economists surveyed by Bloomberg predicted the decision, as inflation remains at a nine-year high. The rest forecast no change.

The central bank predicted inflation will return to the target range of 2% to 4% next year after breaching the goal this year. It estimated price gains to average 3.5% in 2019 and 3.3% in 2020. Inflation was 6.7% in October.

While prices of oil and rice have eased, pressure remains after higher wages and transport costs in Manila were approved recently. The prospect of higher rates in the US adds to risks of financial market volatility and capital outflows.

While the peso is still down more than 5% this year, it has recovered recently and is among the best performers in emerging markets in the past month.

The peso gained 0.5% to 52.805 pesos (RM10.87) per dollar yesterday before the decision was announced

“Bangko Sentral ng Pilipinas is not taking any chances that the recent reprieve in the peso and oil prices will be sustained. That should help it anchor inflation expectations.

“We see the currency remaining vulnerable until inflation peaks and the current-account deficit narrows. Risk appetite could also falter if the stalemate between the US and China persists. This makes it likely that the overnight borrowing rate will be raised further,” said Tamara Henderson of Bloomberg Economics.