MANILA, May 19 : The Philippine peso firmed on Thursday after its central bank raised rates for the first time in more than three years, while Asian shares tumbled on concerns around surging inflation, its impact on retail demand, and the threat of a recession.

Stocks in Manila fell 1%, while the Philippine peso edged up 0.2%. The Philippine central bank raised its benchmark interest rate by 25 basis points, as expected, to address rising inflationary pressures.

"With the recovery in hand and price pressures surging, Bangko Sentral ng Pilipinas (BSP) finally decided to join the rate-hike club... The bigger development was the quick walk-back of pandemic support with BSP closing the provisional advance and tweaking the bond purchase window," said Nicholas Antonio Mapa, senior economist at ING.

Equities in the region also tracked weakness on Wall Street overnight as retail giant Target Corp warning of a bigger margin hit due to rising fuel and freight costs, and Walmart Inc flagging a similar squeeze.

It was the worst one-day loss for the S&P 500 and Dow Jones Industrial Average since June 2020.

"The focus has now shifted towards concerns about U.S. growth as the Fed tightening is well understood and well priced in," said Khoon Goh, head of Asia research at ANZ.

"The market is now concerned that the U.S. economy might be slowing a lot faster than anticipated, particularly given the negative earnings reports coming up from retail companies overnight," said Goh.

Shares in India and Taiwan led losses for Asian markets, falling more than 2% each. Regional currencies weakened too, even as the US dollar eased.

Risk sentiment remained fragile after US Federal Reserve Chair Jerome Powell ratcheted up the hawkish rhetoric. South Korean shares fell more than 1% while the won lead losses among regional currencies, skidding 0.9%.

The Indonesian rupiah, down more than 2.5% since the country announced plans in April to ban exports of palm oil, fell 0.3%. Long-tenor bonds in Singapore, seen as a safe-haven bet, saw yields slip 45 basis points to 2.715%.

 - Reuters