BSP expected to raise policy rate by 50 basis points Thursday

THE Bangko Sentral ng Pilipinas is expected to raise interest rates by another 50 basis points on Thursday to control the elevated inflation rate, a top executive of Sun Life Investment Management and Trust Corp. said Tuesday.

SLIMTC president and chief investment officer Mike Enriquez said in an online briefing the BSP would likely hike the interest rates to match the pace of adjustment by the US Federal Reserve.

“We expect the BSP to hike rates by 50 bps, matching the Fed rate hike. It is unlikely for a 75 bp hike for now, at least until first quarter of 2023,” Enriquez said.

“A 50-bp hike is expected for this month. Two meetings will follow in first quarter of 2023, with the same expected hike [50bps] for each meeting,” he said.

Enriquez said the BSP was caught in a tough place as domestic inflation began stabilizing while US inflation continued to be persistent.

He said the elevated inflation this year was due to surging oil prices early in the year and the adjustments of both food and non-food prices such as transport costs.

He said that because of the impact of typhoon Karding on rice-growing provinces, “we should expect December and January inflation to remain high.”

“We expect inflation to trend lower and decelerate faster than the US in 2023 due to transitory [weather impact] and commodity-heavy nature of our domestic CPI,” he said.

Enriquez said he expected inflation to average 5.8 percent in 2022 and 4.5 percent in 2023.

The interagency Development Budget Coordinating Committee raised the average inflation rate assumption for 2022 to 5.8 percent from the previous estimate of 4.5 percent to 5.5 percent, given the persistent high prices of food and transport costs.