BMI Country Risk & Industry Research expects the BSP to raise key policy rates by another 25 basis points next month as inflation is unlikely to ease within the central bank’s two to four percent target range this year.MANILA, Philippines — Monetary authorities are expected to further increase interest rates after the Bangko Sentral ng Pilipinas delivered a 25-basis-point rate hike during an off-cycle rate-setting meeting on Thursday, according to economists.
Inflation accelerated for the second straight month to 6.1 percent in September from 5.3 percent in August after easing for six straight months to 4.7 percent in July from a peak of 8.7 percent in January. The BSP delivered a 25-basis-point off-cycle rate hike on Thursday, raising the reverse repurchase rate to a fresh 16-year high of 6.50 percent.
“That said, we think that further monetary tightening will do little to help curb price pressures. Admittedly, the spike in consumer prices was largely driven by supply-side challenges. Neri pointed said an inflation print that is significantly higher in October than September’s 6.1 percent may trigger another rate hike.
He added that the BSP’s credibility as an inflation fighter is also another reason why another rate hike is necessary despite the fact that inflation is driven mostly by supply issues.
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