The Bangko Sentral ng Pilipinas (BSP, the central bank) has raised its main policy interest rates for the first time since August 2008. On March 24th the central bank's monetary board increased the overnight borrowing and overnight lending rates by 25 basis points each, to 4.25% and 6.25% respectively. The BSP had been the only major central bank in South-east Asia not to have raised interest rates since slashing the cost of borrowing in response to the 2008-09 global financial crisis. The BSP said that the decision to raise interest rates came in response to accelerating inflation (consumer prices rose by a 22-month high of 4.3% year on year in February) as well as higher international commodity prices, notably for food and oil. The central bank said that its inflation forecasts indicate that its annual average inflation target of 3-5% could be at risk, but added that its "pre-emptive" response to the build-up in price pressures would anchor inflationary expectations.

Prior to the recent move, the BSP had left its two main interest rates at record lows since July 2009. The economy's strong performance in the fourth quarter of 2010, when real GDP expanded by 7.1% year on year, and the continuing growth in merchandise exports and remittances in the first month of this year, appear to have convinced the bank that the economy can withstand higher interest rates.