Banks see rate hike this year

The Bangko Sentral ng Pilipinas (BSP) is expected to turn hawkish and deliver a rate hike in the fourth quarter amid rising inflation and the continued weakening of the peso against the dollar, ING Bank and ANZ Bank said over the weekend.

Joey Cuyegkeng, senior economist at ING Bank Manila, said the BSP is expected to raise benchmark rates by 25 basis points this year and by another 50 basis points next year due to the depreciation of the peso against the dollar.

“To manage the weakness of the Philippine peso, we are still expecting a December BSP-MB policy rate hike of 25 basis points and another 50 basis points in 2018,” he said.

The BSP last raised key policy rates by 25 basis points in September 2014. In June last year, it made an operational adjustment when it lowered benchmark rates as it shifted to the interest rate corridor (IRC) system.

“No change in monetary policy is likely over an extended period,” Cuyegkeng said.

The central bank’s accommodative stance has been supportive of a sustainable economic growth as it allows companies and consumers to borrow at a lower rate to boost investments and private consumption.

Last Aug. 10, the BSP kept interest rates unchanged but raised its inflation forecasts to 3.2 instead of 3.1 percent for this year, to 3.2 instead of three percent for 2018, and to 3.1 instead three percent in 2019.

“The revised inflation forecasts of BSP still indicate that inflation over the policy horizon to remain close to the mid-point of the target inflation range of two to four percent,” he said.

ING Bank sees inflation picking up to 3.5 percent in 2018 and 2019 from the projected three percent this year due to the impact of the comprehensive tax reform program (CTRP). Turn to B3