Fitch unit sees 50 bps rate lift in 2019

Fitch Solutions Macro Research said the Bangko Sentral ng Pilipinas (BSP) may raise interest rates anew by as much as 50 basis points next year after pausing from its tightening episode during its rate-setting meeting this Thursday.

The research arm of Fitch Ratings said inflation remains elevated, exceeding the BSP’s two to four percent target despite easing to six percent in November from 6.7 percent in October.

“The continued high inflation rate informs our expectation for the BSP to resume its tightening cycle in 2019, with 50 basis points worth of rate hikes over the year, aimed at bringing prices down to more manageable levels,” it said.

Fitch Solutions said the Monetary Board may keep benchmark rates unchanged during its last rate-setting meeting for the year scheduled on Dec. 13.

The BSP has jacked up interest rates by 175 basis points in five straight ratesetting meetings since May to curb rising inflationary expectations. It last raised interest rates by 25 basis points last Nov. 15 as a proactive action to rein in inflation.

“We believe that the BSP’s 25 basis point hike in November was a pre-emptive move to the US Fed’s likely 25 basis point hike this month. Combined with the recent decline in crude oil prices, this is likely to provide room for the BSP to remain on hold in December, barring any global risk-off event,” Fitch Solutions said.

It added the easing of rice import rules and the suspension of the oil excise tax would also help to rein in inflation.

Earlier, BSP Governor Nestor Espenilla said monetary authorities are not letting their guard down as there is a need to closely monitor rising core inflation that excludes the volatile oil and food prices.

Despite the slowdown in headline inflation, core inflation rose to 5.1 percent in November from 4.9 percent in October, bringing the average to 4.1 percent from January to November.