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Philippines: ANZ sees BSP revising rates in June
MANILA, Philippines — The research unit of Australia and New Zealand Bank expects the Bangko Sentral ng Pilipinas (BSP) to deliver its first interest hike in June, reversing the aggressive 200-basis-point cumulative rate cuts in 2020.
In a report, ANZ Research said the BSP is likely to raise interest rates by 25 basis points in June.
ANZ Research said inflation last month likely quickened to 4.5 percent in April from four percent in March, as a pick-up in demand, together with higher prices of fuel, utilities as well as persistent food supply shortages, were the key drivers.
The research arm said that two consecutive weeks of rollback in domestic oil prices have not provided much relief.
According to ANZ Research, gasoline prices still rose by P3.6 per liter, while diesel prices were higher by P12.3 per liter compared to March.
It noted that higher input costs also forced the Manila Electric Co. (Meralco) to raise electricity tariffs above P10 per kilowatt-hour in April – a record-high hike.
“We expect upward price pressures to persist throughout the second quarter as second-round impacts of higher oil prices become more pronounced. Accordingly, we now expect the BSP to deliver its first 25 basis points hike in June,” ANZ Research said.
The Monetary Board is widely anticipated to keep an accommodative stance by maintaining the benchmark rate at an all-time low of two percent on May 19 before starting its interest rate lift-off on June 23.
The research arm of ANZ is now expecting the BSP to hike interest rates by 125 basis points this year, with 25-basis-point rate hikes each in June, August, September, November and December.
This would bring the overnight reverse repurchase rate to 3.25 percent from the current record low of two percent.
ANZ Research previously expected two rate hikes that would bring the benchmark rate to 2.50 percent this year. It was originally expecting the BSP to deliver its first rate hike in the fourth quarter.
The BSP has kept an accommodative stance for more than a year after slashing interest rates by 200 basis points in 2020 as part of its COVID response measures.
BSP Governor Benjamin Diokno earlier said the Monetary Board could deliver its first rate hike as early as June after keeping interest rates on hold since the last rate cut in November 2020.
Diokno said in an interview with ABS-CBN News Channel that the decision of monetary authorities would remain data-driven.
The BSP chief pointed out that the Monetary Board is likely to maintain an expansionary monetary policy stance in its rate-setting meeting this month to wait for the release of the gross domestic product (GDP) growth for the first quarter.
“We really have to balance. Whether the recovery that we’re seeing is sustainable. That’s why we’re going to wait for the GDP number for the first quarter this year,” Diokno said.
Source: https://www.philstar.com/business/2022/05/03/2178281/anz-sees-bsp-revising-rates-june