ING Bank sees rate hike next yr

Dutch financial giant ING sees the Bangko Sentral ng Pilipinas ( BSP) hiking rates next year amid the continued volatility in the global financial market.

Joey Cuyegkeng, chief economist at ING Bank Manila, said the BSP could raise interest rates by 50 basis points next year due to the continued weakening of the peso against the dollar.

Cuyegkeng said increased currency volatility as seen by the underperformance of the peso could elicit a hawkish response from the BSP.

Last Nov. 12, the BSP kept policy rates unchanged for the 9th policy- setting meeting since October amid the country’s economic growth momentum and benign inflation environment.

BSP Governor Amando Tetangco Jr. said earlier the challenging external environment and uneven growth prospects in advanced and key emerging economies supported a steady policy setting.

“Given these conditions, the Monetary Board believes the benign inflation environment and the economy’s underlying growth momentum provide adequate room to maintain monetary policy settings,” Tetangco said.

“The Monetary Board also observed that domestic demand conditions have stayed firm, as business and consumer sentiment continue to be buoyant and domestic liquidity remains adequate,” he added.

Inflation remained at a record low of 0.4 percent in October due to stable food prices and lower utility rates, bringing average inflation in the first 10 months to 1.4 percent, way below the inflation target of between two and four percent set by the BSP for this year and next year.

The BSP has further lowered its inflation forecast to 1.4 percent instead of the previous projection of 1.6 percent for this year, 2.3 percent instead of 2.6 percent next year and to 2.9 percent instead of three percent for 2017.