UR P130.000 Value : P866,325,025 -P1.000▲-0.763% Economists expect fresh rate hike
THE BANGKO SENTRAL ng Pilipinas (BSP) will most likely raise benchmark interest rates anew this week as inflation can be expected to have spiked further in July, analysts said in a Business-World poll, with some noting there is room for a 50-basis-point (bp) hike to ease price pressures.
A poll of 14 economists last week yielded a median estimate of 5.5%, which if realized will inch up from June’s actual 5.2% and soar from July 2017’s 2.4%.
The estimate also falls in the middle of the 5.1-5.8% range given by the BSP Department of Economic Research last week.
“The main product groups that likely posted sharp price increases are fish, rice, corn, fruits, vegetables, tobacco, transport, electricity, gas and fuel,” said Security Bank Corp. economist Angelo B. Taningco, who gave a 5.7% estimate.
Typhoons and monsoon rains that hit the country last month contributed to price pressures, as did the P1 provisional increase in jeepney fares that took effect in early July, the analysts said.
The Philippine Statistics Authority will report official inflation data on Tuesday. As of end-June, prices have increased by an average of 4.3%, well beyond the BSP’s 2-4% goal for 2018.
Preliminary data from the Finance department showed that July inflation could settle at 5.3%, still higher than June’s tally which was a nine-year high.
Economists saw a broad-based increase in commodity prices, led largely by movements in food and fuel costs. The peso, which traded weaker than P53 versus the dollar last month, may have also jacked up the cost of imported goods.
“It is likely that the peak of inflation is still ahead of us,” said Jose Mario I. Cuyegkeng, senior economist at ING Bank N.V. Manila, adding: “We expect government efforts to make a more significant impact on alleviating supply and distribution weaknesses.”
Analysts said that inflation could top out in August and slowly slide back to the target range by 2019.
Emmanuel J. Lopez, economics professor and dean of the Colegio de San Juan de Letran Graduate School, also noted that price increases could “gradually taper off” this month amid a slowdown in business activity because of the Chinese “ghost month” superstition.
The BSP has said that inflation will likely peak this quarter and eventually ease, bringing the full-year average to 4.5%.
RATE HIKE The economists agree that the BSP will raise policy rates this week, but differ on magnitude.
Six analysts said a 50 bp hike would be announced by the Monetary Board on Thursday, while the rest see a 25 bp increase on the table.
“In our meeting with the BSP Governor last week, he stressed the ‘strong response’ of the BSP to the persistently elevating inflation level. An equivalent of strong response would be, to me, a 50 basis points hike,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.