DBS Bank of Singapore expects the Bangko Sentral ng Pilipinas to raise interest rates twice in 2017, judging from its latest moves such as the increase in the volume of its weekly term deposit facility auction.
“CPI inflation is expected to return to 3.1 percent in 2017, within target. Domestic demand is said to remain robust. Whether or not these comments are meant to prep the market for gradually higher rates is debatable,” DBS said, referring to Bangko Sentral’s comments when it decided to keep the benchmark interest rates steady in a meeting Thursday.
“Note, however, that starting in July, the BSP will increase the amount of its term deposit facility auction from P30 billion to P50 billion. This is a strong signal that the BSP would want to continue absorb excess liquidity in the market,” the bank said.
DBS said it saw a high risk of a rate hike within the next 12 months.
“We expect at least two hikes in 2017 to bring the policy rate to 3.5 percent, up from the current 3 percent,” the bank said.
