BSP to keep rates steady

By , on October 21, 2014

Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo
Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo

MANILA – UK-based bank Barclays noted that the Bangko Sentral ng Pilipinas is expected to keep policy rates steady.

“With the decline in commodity prices, we expect the BSP to keep rates unchanged, but maintain a hawkish tone,” the bank said.

Inflation was reduced to 4.4 percent in September from 4.9 in August despite lower increases in housing, utility rates, and food prices.

On September 11, monetary authorities increased the rate of overnight borrowing and overnight lending to four and six percent, respectively. This is to make sure that the inflation rate will stay within the three-to-five percent target this year, and two-to-four percent in 2015.

Monetary Board will likewise revisit the policy settings on October 23.

According to Barclays, they see that the BSP will be able to maintain the rates until the first quarter of 2015. Afterwards, the 25-bps rate hike will take place during the second quarter of next year.

The bank added that another 25-bps increase will happen during the third quarter of next year.

In order to keep the inflation expectations on the right track, BSP already increased the policy rates by 50 bps.

BSP Deputy Governor Diwa C. Guinigundo last week said that the improvement in the port congestion in Metro Manila may have a “favorable impact” on inflation given that it paved way for improvement of suppy.

He added that inflation is already at its peak last July and August when it hit 4.9 percent.
For 2014, BSP said that its forecast on inflation rate is at 4.5 percent and 3.8 percent in 2015.

Since the beginning of the year, the inflation rate average is 4.4 percent.