Manulife sees BSP lowering key rates

AN analyst from Manulife Investment Management and Trust Corp. (MIM PH) said that Bangko Sentral ng Pilipinas (BSP) could lower its policy rates to lift the country’s macroeconomic growth.

MIM PH Head of Equities Mark Canizares said stable prices would give the BSP room for its policy settings to be more accommodative despite the rise of inflation to 3.4 percent this February 2024 than the 2.8 percent posted in the previous month.

Easing key policy rates “would create a more conducive environment for corporates to expand businesses while consumer spending can further accelerate,” according to Canizares.

He added that these would be conducive for rerating the consumer names and the banking sector.

The inflation rate in February fell within the BSP’S target range of 2 percent to 4 percent, which the MIM PH attributed to high base effect and relatively stable overall prices of food and commodities.

Canizares noted that the increase in transport prices will slow down after most global energy prices, specifically crude oil stabilize in the past twelve months ending last February.

The analyst also pointed out that a significant increase in rice prices year-on-year (Y-O-Y) would also continue, citing the Philippine Statistics Authority’s data that rice prices remained elevated in February rising 1 percent month-on-month after increasing by 23 percent in January.

Head of Fixed Income Jean Olivia de Castro said MIM PH thinks that inflation will be within the BSP’S target range for the first quarter of the year mainly due to base effects.

De Castro also projected inflation to accelerate again in the second quarter of the year as base effects will dissipate.

“Upside risks to inflation may stem from elevated rice prices and continued increases in global oil prices,” de Castro said.

The analyst pointed to OPEC supply cuts, conflict in the Middle East, and Houthi attacks on shipping lines in the Red Sea for the increase in oil prices by over 8 percent during the first two months of the year.

Lower tariff rates, increase in rice imports and the harvest season should help cap the continued increase in rice prices, according to de Castro, noting the 22.6 percent Y-O-Y rice price increase in January.

“We expect them to remain elevated as export restrictions remain from India, the world’s biggest supplier, and as importing countries increase purchases to combat effects of El Niño, which could last until midyear,” the analyst added.