By Joann Santiago
MANILA, Aug. 13 (PNA) — The low-inflation environment combined with recent weakness of the peso made Barclays changed its forecast on the timing of the possible increase in the Bangko Sentral ng Pilipinas (BSP) rates to third quarter of 2016.
In a reserch note, the investment bank said domestic growth remains strong and is ” expected to remain the key driver of activity.”
It still sees a hike in the BSP rates but expects this late next year given the recent weakness of the local currency, which is now at over five-year low at 46-level.
“As such, we are pushing back our forecast of a rate hike in Q4 15, to Q3 16, when election-related uncertainty should be over, and inflation starting to pick up,” it said.
With these factors in place, the investment bank expects “market attention to shift rapidly towards next May’s presidential election, which is likely to become a bigger focus going into Q4 2015.”
To date , the central bank’s overnight borrowing rate or reverse repurchase(RRP) rate is at four percent and the overnight lending or repurchase (RP) rate is at six percent.
These were again kept steady Thursday due to current low-inflation environment and still robust domestic growth.
These were last adjusted in September 2013 when it was hiked by 25 basis points.
In 2013, these rates were hiked by total of 50 basis points to address the strong rise in domestic inflation rate, which almost breached the upper end of the government’s three to five percent target that year.
This transpired in July and August when inflation rate hit 4.9 percent.
It has gone down after that period due to other several measures implemented by the central bank.
In the first seven months of 2015, inflation averaged at 1.9 percent, below the government’s two to four percent target for this year until 2018.
Last July alone, inflation fell to 0.8 percent from the previous month’s 1.2 percent due to lower inflation on food items among others.(PNA)