BSP seen hiking rates in Q3

The Bangko Sentral ng Pilipinas (BSP) is seen to raise its key rate by 25 basis points in September due to “strong demand catalysts” and higher inflation rates, Singaporebased Smartkarma analyst Jun Trinidad said. In a commentary, the investment research firm cited a convergence of factors for the late third quarter hike, namely, an elevated inflation expectations, additional official development assistance that the government will implement, plus some “big-ticket infrastructure projects initiated, unsolicited infrastructure project proposals from the private sector approved, buildup of strong consumer demand, and stirrings of cost-push, pass-through effects.” The BSP’s Monetary Board – stirring mixed sentiments on its hawkish stance – left its policy rate untouched during its March 22 meeting. Trinidad said the interest rate corridor that the BSP adopted in 2016 as a policy framework is “still intact.” The BSP’s decision to a hold stance came a day after the US Federal Reserve raised its own policy rates. “While the Fed’s decision was widely anticipated, market expectations on the Monetary Board’s meeting outcome was a split with a significant minority (40 percent) of those economists/traders surveyed anticipating a rate hike,” noted Trinidad. The BSP’s latest assessment indicated that inflation rate for 2018 and 2019 will not breach the target range. Using the rebased consumer price index with 2012 as base year, the estimated inflation average for this year is 3.9 percent and three percent for 2019, and within the two percent to four percent target range.(LCC)