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Philippines – Think tank: Pause in BSP rate hikes likely in May
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to pause rate hikes next month as inflation eased to a six-month low in March, according to UK-based think tank Pantheon Macroeconomics.
In a report, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and senior Asia economist Moorthy Krshnan said the latest inflation data is “strengthening our conviction that the Monetary Board will pause when it meets in May.”
The Philippine Statistics Authority has announced that inflation, or the rate of increase in prices of consumer goods and services, slowed to 7.6 percent in March from 8.6 percent in February, with food and transport costs posting slower upticks.
The latest inflation print is the lowest seen since the 6.9 percent recorded in September last year.
It is also near the bottom end of the BSP’s 7.4 to 8.2 percent forecast range for March.
“More importantly, it will reassure Monetary Board members that January was the peak in inflation,” the Pantheon economists said.
Inflation hit a 14-year high of 8.7 percent in January.
Chanco and Krshnan said inflation is expected to continue to ease for the rest of the year, with food as the biggest driver.
“Food price disinflation should now proceed rapidly, as it plays catch-up to the still-improving trend globally,” they said.
Also expected to contribute to the continued easing of inflation are oil price-sensitive components housing and utilities, as well as transport.
The economists said inflation is expected to be back to the BSP’s two to four percent target in October, at the earliest.
Average inflation for the January to March period is at 8.3 percent.
Since May last year, the BSP has raised key policy rates by a total of 425 basis points to rein in inflation.
This brought the overnight reverse repurchase rate to 6.25 percent, the highest since the 7.50 percent in May 2007.
The BSP is set to hold the next rate-setting meeting on May 18.
Source: https://www.philstar.com/business/2023/04/10/2257656/think-tank-pause-bsp-rate-hikes-likely-may