ING Bank Manila said Tuesday it expects the Bangko Sentral ng Pilipinas to increase the benchmark interest rate again before the end of the year.
“With inflation showing some signs of tapering off and if it has indeed peaked, this lowers the probability that the BSP will need to enact another round of rate hikes at its next meeting although we continue to price in a 25-bp [basis point] rate hike in 2018,” ING Bank said in a report.
The Dutch bank said the timing of the rate hike, which would be carried out to anchor inflation expectations going into 2019, would likely rest on the October inflation print and on whether further petitions for wage hikes or transport adjustments would be granted.
The Monetary Board, the policy-making body of Bangko Sentral, already raised the overnight borrowing rate by a total of 150 basis points since May 2018 in a bid to temper the rising prices.
Inflation in September climbed to 6.7 percent from 6.4 percent in August.
The Monetary Board also raised the inflation forecast for 2018 to 5.2 percent from an earlier estimate of 4.9 percent. The forecast for 2019 was raised to 4.3 percent from 3.7 percent, while the forecast for 2020 was retained at 3.2 percent.
The Bangko Sentral maintained its hawkish bias for now, with Deputy Governor Guinigundo, as officer-in-charge, indicating that non-monetary measures had begun to take root but also vowed to “remain vigilant with a strong tightening bias until such time that inflation could be sustained within target.”
ING Bank said earlier the BSP might not be done hiking interest rates and it might still enact another round of rate hikes as inflation expectations remained elevated going into 2019.