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THE BANGKO SENTRAL ng Pilipinas (BSP) is widely expected to <\/span>raise rates of interest for the primary <\/span>time in greater than two years as inflation risks mount amid tensions within the Middle East, based on a slight majority of analysts in a poll.<\/span><\/p>\n A BusinessWorld<\/i> poll conducted last week showed that 11 out of 19 analysts expect the Monetary Board to hike the goal reverse repurchase rate by 25 basis points (bps) at its policy meeting on April 23.<\/p>\n If realized, this is able to bring the benchmark rate to 4.5% from the present 4.25%, marking the BSP\u2019s first tightening move in over two <\/span>years or since October 2023.\u00a0<\/span><\/p>\n Then again, eight analysts said the BSP will likely hold its key rate regular, citing supply-driven inflation risks and weaker growth prospects.<\/p>\n Since starting its easing cycle in August 2024, the central bank has slashed the benchmark policy rate by a complete of 225 bps to an over three-year low of 4.25%. It also kept borrowing costs regular in an off-cycle meeting last month to calm markets amid growing uncertainties stemming from the war. <\/span><\/p>\n Most analysts said the Monetary Board will likely raise rates on Thursday as a preemptive move to anchor inflation expectations, with inflation seen breaching the 2-4% goal if energy prices remain elevated.<\/p>\n \u201cA 25-bp hike would allow the BSP to reaffirm its commitment to cost stability, at the same time as it keeps a calibrated and data-dependent stance going forward,\u201d Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said. <\/span><\/p>\n Metropolitan Bank & Trust Co. (Metrobank) Chief Economist Nicholas Antonio T. Mapa said in a Viber message that monetary tightening will help \u201ccorral inflation expectations which may be fraying because of surging energy costs and subsequent pickup in prices because of second-order effects.\u201d <\/span><\/p>\n BSP Governor Eli M. Remolona, Jr. last week told BusinessWorld<\/i> that they’ve room to lift rates to temper rising inflation amid the Middle East conflict as they expect government spending to support growth.<\/p>\n Mr. Remolona noted that second-round effects may emerge before expected as the worldwide oil price shock is anticipated to spill over into <\/span>domestic food and transport costs.\u00a0<\/span><\/p>\n In March, elevated oil prices because of the war drove inflation to a near two-year high of 4.1%, faster than the BSP\u2019s 3.1%-3.9% forecast and a couple of%-4% goal for the 12 months.<\/p>\n \u201cWhile current pressures remain largely supply-driven, historical experience suggests prolonged shocks are likely to spill over into demand-side dynamics, increasing the chance of de-anchored inflation expectations,\u201d Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said in a report.<\/p>\n Rizal Business Banking Corp. Chief Economist Michael L. Ricafort noted in a Viber message the BSP had raised borrowing costs in 2022 when Russia\u2019s invasion of Ukraine led to global crude oil prices breaching $100-per-barrel levels.<\/p>\n \u201cThere’s a possibility of BSP rate hike, much like the previous cycle 4 years ago in an effort to curb inflationary pressures on the bud and higher manage inflation and stop it from spiraling further, in an effort to bring back inflation to the inflation goal range of two%-4%, even when the unintended consequences include slowing down the economy,\u201d Mr. Ricafort said.<\/span><\/p>\n Marco Antonio C. Agonia, an economist and analyst on the University of Asia and the Pacific (UA&P), said in an e-mail that the move on Thursday shall be a one-off hike, with the BSP standing pat for the remaining of the 12 months.<\/p>\n \u201cGiven the softer growth outlook, further rate hikes could also be too damaging for economic performance,\u201d Mr. Agonia said.<\/p>\n Mr. Agonia noted a rate hike may even provide peso relief without using too many reserves.<\/p>\n Because the US and Israel began attacks on Iran on Feb. 28, the peso has weakened to breach the P60-per-dollar level, hitting a record low of P60.748 on March 31.<\/p>\n \u201cThe peso will likely remain under pressure because the situation within the Middle East stays fluid. A sharper depreciation would amplify imported inflation. This foreign exchange-inflation feedback loop may ultimately turn out to be a binding constraint, and will require tighter policy even within the face of a supply-driven shock,\u201d Mr. Neri said. <\/span><\/p>\n HOLD? Philippine National Bank economist Alvin Joseph A. Arogo said in an e-mail that the BSP should keep the policy rate at 4.25% on April 23 since raising financing costs seems at odds with the sooner move to offer loan relief amid current output constraints.<\/span><\/p>\n \u201cMonetary tightening this soon could seriously put in danger prospects for growth recovery without doing much dent on inflation,\u201d he said.<\/p>\n In a report, DBS said the BSP will likely keep rates unchanged amid slowing growth.<\/p>\n \u201cThe Philippines faces a possible stagflationary shock this 12 months, with growth witnessing a weak handover from last 12 months, while inflation comes off a low base, and peso stays under pressure,\u201d DBS said.<\/span><\/p>\n China Banking Corp. (Chinabank) in a note said the BSP is more likely to adopt a \u201cprudent wait-and-see approach\u201d because of heightened global uncertainty.<\/p>\n \u201cDomestically, inflationary pressures proceed to be driven largely by volatile supply-side aspects, while demand conditions are showing signs of softening, reducing the case for immediate monetary tightening,\u201d Chinabank said.<\/span><\/p>\n ING said the weaker growth outlook will prompt the BSP to carry rates but expects Thursday\u2019s decision to \u201clikely be close.\u201d<\/p>\n \u201cThe Philippines stays one of the crucial oil-exposed economies within the region, prompting us to downgrade our 2026 GDP (gross domestic product) growth forecast to 4.5%. Against this weaker growth backdrop \u2014 and assuming the present geopolitical escalation eases within the near term \u2014 our base case is for the central bank to stay on hold in April,\u201d ING said.<\/span><\/p>\n HAWKISH BSP \u201cThe Philippines is within the hawkish camp, leaving the door open to modest tightening moves this 12 months if price risks prevail, as retail fuel prices are susceptible to swings in tune with global prices,\u201d DBS said. <\/span><\/p>\n Standard Chartered Bank Asia Economist and FX Analyst Jonathan Koh said in a report that while they don’t expect a rate hike this month, the BSP could raise borrowing costs at its June 18 meeting.<\/p>\n \u201cInflation passthrough is more likely to pick up in coming months, driven by faster fiscal spending, possible transport fare hikes, higher rice and food prices, and Philippine peso-driven imported inflation, which could eventually prompt a one-off rate hike to safeguard price stability,\u201d Mr. Koh said.<\/span><\/p>\n Then again, Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., said the central bank could even reverse its expected rate hike this week by the second half of the 12 months if the Middle East conflict is resolved soon. \u2014 Aaron Michael C. Sy <\/b><\/p>\n<\/p><\/div>\n <\/p>\n","protected":false},"excerpt":{"rendered":" A lady shops for groceries at a store in Manila. \u2014 PHILIPPINE STAR\/RYAN BALDEMOR THE BANGKO SENTRAL ng Pilipinas (BSP) is widely expected to raise rates of interest for the primary time in greater than two years as inflation risks mount amid tensions within the Middle East, based on a slight majority of analysts in […]<\/p>\n","protected":false},"author":1,"featured_media":321461,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[17106,19250,28717,7677,6229,3731,15693],"class_list":["post-321460","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-bsp","tag-hike","tag-majority","tag-poll","tag-rate","tag-sees","tag-slight"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/321460","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/comments?post=321460"}],"version-history":[{"count":2,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/321460\/revisions"}],"predecessor-version":[{"id":321463,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/321460\/revisions\/321463"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/media\/321461"}],"wp:attachment":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/media?parent=321460"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/categories?post=321460"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/tags?post=321460"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
<\/b>Meanwhile, eight analysts expect the BSP to carry rates on Thursday, as monetary tightening cannot do much in addressing supply shocks.<\/span><\/p>\n
<\/b>Meanwhile, Chinabank said concerns over the de-anchoring of inflation expectations are likely to maintain the BSP hawkish.<\/span><\/p>\n