BSP tipped to keep rate at 6.25%

MANILA  -The benchmark interest rate of the Bangko Sentral ng Pilipinas (BSP) is expected to remain at 6.25 percent for the fourth policy meeting in a row when the Monetary Board convenes on Sept. 21.

ING Bank, based in The Netherlands, said in a commentary that the BSP will “likely stand pat as inflation pressures flare up.”

The latest monthly readout for headline inflation showed an uptick to 5.3 percent after six months of easing from 8.7 percent in January to 4.7 percent in July.

Goldman Sachs also expects the same, noting that despite the faster growth of prices last month, the BSP continues to expect inflation to ease back into its target band of 2 percent to 4 percent by October.

The American group also noted the BSP’s own caveat that this expectation is based on the premise that there will be no further supply shocks.

“While inflation risks remain skewed to the upside due to higher global food and energy prices, recent comments by the governor suggest another hike is not necessary at this time, although easing is not yet justified either,” Goldman Sachs said.

According to Robert Dan Roces, chief economist at Security Bank Corp., the BSP will consider inflation, economic growth, and external factors in making its decision.

“(T)he recent uptick in the August inflation alone is unlikely to prompt the BSP to resume tightening, recognizing the supply-side nature of the uptick and the fact that there would only be so much that monetary policy can do in such a situation, which requires fiscal complement,” Roces said.

“Looking ahead, inflation should still moderate in the coming months, but the BSP is unlikely to start easing policy until the middle of 2024, after the US Federal Reserve does so, he added.

Meanwhile, Pantheon Macroeconomics in the United Kingdom expects the BSP to start reducing the policy rate by 0.25 percentage point to 6 percent as early as November.

Pantheon Macroeconomics also expects another such rate cut in December to end the year at 5.75 percent.

During the Marcos administration’s economic team’s visit to Qatar on Sept. 10, BSP Deputy Governor Francisco Dakila Jr. said the central bank remained ready to secure the inflation target.

Dakila said the average inflation for 2023 is projected to settle at 5.6 percent, 3.3 percent in 2024 and 3.4 percent in 2025.