Poll reveals market consensus for steady rates at May 11 review

THE BANGKO SENTRAL ng Pilipinas (BSP) will likely hold fire on policy rates this week on the back of stable inflation, analysts said in a BusinessWorld poll as they noted that any tweaks will probably be delivered by the second half of the year, coinciding with the transition in central bank leadership.

Thirteen economists tapped late last week all said the BSP will keep its monetary policy stance steady during a rate review on Thursday, with monthly inflation still manageable despite hovering above the 3% level in recent months.

“It is unlikely that BSP will have a change in monetary policy because inflation rate in April of 3.4% is within the target set by the Monetary Board,” said Emmanuel J. Lopez, chair of the Departnext

ment of Economics of the University of Santo Tomas.

April inflation matched the 3.4% rate in March and surged from a 1.1% reading in April 2016, but still falls within the central bank’s 2-4% target band. For the first four months, inflation averaged 3.2%, on track to meet the BSP’s 3.4% estimate for 2017.

BSP Governor Amando M. Tetangco, Jr. said last week that current policy settings remain “appropriate,” but noted that prices could still go higher on the back of possible increases in fuel and electricity costs. The BSP chief previously noted that inflation will likely sustain an uptrend and peak by the third quarter.

Analysts said price movements remain broadly in line with the central bank’s expectations, thus leaving no urgent need to tweak the benchmark interest rates given “robust” economic growth.

“We still believe that a policy tightening is imminent in the Philippines, but a move appears unlikely this week. Consumption growth is still robust, led by non- food consumption growth. Investment growth is still set to come in the double-digits, as the government targets infrastructure spending to reach 5% of GDP ( gross domestic product),” added Gundy Cahyadi, economist at DBS Group Research.

Several economists are expecting one or two rate hikes from the BSP later this year, which should come given the likelihood of a fresh 25-basis-point increase from the US Federal Reserve next month.

“I expect the earliest period for the central bank to start raising its key interest rates is September this year with the major factors for such move to be stronger inflationary pressures domestically as well as interest rate hikes in the US,” said Angelo B. Taningco, economist at Security Bank Corp.

However, some flagged the changing of the guards at the BSP as another event that could influence the timing of policy tightening.