By Joann Santiago
MANILA, June 25 (PNA) — Economists expect a hike in the Bangko Sentral ng Pilipinas’ (BSP) key rates in the second half of 2015 even after monetary officials keep rates steady anew Thursday.
BSP Governor Amando Tetangco Jr., in a briefing after the meeting of the central bank’s policy-making Monetary Board (MB), said ample liquidity and expected increase in government spending along with low inflation environment and robust domestic expansion backed their latest policy decision.
Thus, the central bank’s reverse repurchase (RRP) rate remains at four percent, the repurchase (RP) rate is at six percent, and the special deposit account (SDA) rate is still at 2.5 percent.
Barclays, in a report released after the central bank announcement, said the MB’s decision to keep rates steady for six consecutive policy meetings was in line with market consensus.
It, however, noted Tetangco’s statement about the near-term upside risks to inflation such as the electricity rate hike petitions and jeepney fare and taxi flagdown rate hikes by July.
Effects of the El Nino phenomenon is also seen to cause increase in the inflation rate in the second half, it said.
Barclays, however, said that despite the slowdown of inflation in recent months, domestic demand remained strong, thus, it continued “to expect the next policy decision to be a hike.”
“With that said, benign inflation does leave room to keep policy on hold for the time being. As such, we continue to expect the next hike to take place in Q4 15, after the Fed begins tightening,” it said.
“In the meantime, we expect market attention to shift rapidly towards next May’s presidential election,” it added.
Relatively, Bank of Philippine Islands, in a market report, said the central bank “is not inclined to compensate” for the slowdown in first quarter domestic output because private demand remained healthy and there was independence between fiscal and monetary policies.
It, however, cited that “the BSP may opt to unveil a number of macroprudential measures, possibly in key sectors like real estate to mitigate the chances of financial bubbles.”
It also forecasts that the central bank would announce in the coming months details of the planned Term Auction Facility “to complement its existing liquidity tools.”
“Our central scenario remains for a BSP policy hike in the balance of 2015 in order to safeguard the inflation path going into 2016,” it added. (PNA)