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Philippines: BSP seen to be done with rate hikes
MANILA, Philippines — With the country’s second quarter economic performance expected to disappoint, the Bangko Sentral ng Pilipinas (BSP) is likely to be done with rate hikes following last week’s off-cycle rate increase, according to United Kingdom-based think tank Pantheon Macroeconomics.
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said the BSP’s recent 75-basis point rate hike is seen as a one-and-done move.
“We maintain that a poor Q2 (second quarter) GDP (gross domestic product) report will force members to a pause in August; the only difference now is that we reckon that the hiking cycle is over,” he said.
Last week, BSP delivered a surprise off-cycle 75-basis point hike, bringing the key policy rate to 3.25 percent.
Prior to last week’s rate hike, Pantheon Macroeconomics expected the BSP to no longer raise interest rates this year.
Last week’s rate hike follows BSP’s rate increases of 25 basis points each last May and June to curb rising inflation.
“The July hike is an overkill as we see no signs of what the BSP thinks as inflation ‘broadening’ and ‘sustaining,’” Chanco said.
He said the percentage-point contribution of food, housing and utilities and transport, has been stable since March.
Moreover, the think tank expects a decline in fuel prices to lead to a slowdown in the price increases of other commodities soon.
BSP Governor Felipe Medalla said last week he was not ruling out another rate hike in the next rate setting meeting of the Monetary Board on Aug.18.
He said the need for a 50-basis point increase is much less now.
Inflation rose to 6.1 percent in June from 5.4 percent in May.
For the first half, the country’s inflation rate averaged 4.4 percent, above the BSP’s two to four percent target range.
Source: https://www.philstar.com/business/2022/07/20/2196550/bsp-seen-be-done-rate-hikes