BSP keeps rates
proposed tax reform program, as well as possible adjustments in transportation fares and electricity rates, the Monetary Board said.
“It is possible. And we assume that the Congress will pass the tax reform package by the fourth quarter of 2017. In terms of the adjustment in excise tax on fuel of about P6.00, it will be staggered. So the impact on consumer price would be gradual,” Guinigundo said.
Within range
months of the year because of increases in food and oil prices, as well as base effects, the latest forecasts continue to indicate within the target range of 3 percent ± 1 percentage point for 2017 and
- target over the policy horizon,” Tetangco said.
The lingering uncertainty over the prospects of the global economy, due in part to possible shifts in macroeconomic policies in advanced economies, continues to pose a key downside risk to the
The board, however, emphasized that domestic economic activity is projected to stay firm, supported by buoyant household consumption and private investment, increased government spending and ample credit and liquidity.
“With these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate,” Tetangco said.
“Looking ahead, the BSP will continue to monitor and assess evolving economic conditions to - ity conducive to sustainable economic growth,” he added.
During the policy meeting, the board decided to keep the reverse repurchase (RRP) facility rate at 3 percent. The corresponding rates for overnight lending and deposit facilities also remain unchanged at 3.5 percent and 2.5 percent, respectively. The reserve requirement ratio was kept steady at 20 percent.
Analysts expect rate hike in Q3
In reaction, analysts said the BSP will be compelled to adjust policy rates in the third quarter of 2017.
ANZ Research said it expects the BSP to raise its rate corridor parameters with a cumulative 50 basis points (bps) this year.
marginally lowered for 2017 and upside. Even as cost pressures are likely to subside in H2, demandpull forces will persist. This will trend,” ANZ Research economist Eugenia Victorino said.
ING Bank chief economist for Asia Tim Condon is forecasting a couple of 25 bps policy rate hike—one in the third, the other in the fourth quarter. “Governor Tetangco steps down in early July and we think he’ll do so without raising rates,” Condon said.
economist Rajiv Biswas expect domestic demand and the upturn likely to keep the BSP in a tightening bias, with a rate hike seen later this year.
Fitch-owned BMI Research sees the central bank being compelled to raise the benchmark rate by 50 bps to 3.50 percent before the year is out.
“We expect the BSP to tighten its monetary policy stance, as in amid an interest rate hike cycle in the US. Furthermore, strong economic growth momentum will hike rates,” it said.