Hongkong and Shanghai Banking Corp. said Wednesday monetary policy conditions in the Philippines remain “tight” given the persistent elevated inflation that is one of the highest in the region.
HSBC chief investment officer for the Southeast Asian region James Cheo said in an online briefing the Bangko Sentral ng Pilipinas might continue to keep the policy rates unchanged for the rest of the year.
“[The] Philippines’ monetary policy is still going to be tight,” Cheo said. “The central bank kept the policy rate unchanged at the May meeting, but may tighten further if inflation surprises on the upside.”
Inflation peaked at 8.7 percent in January 2023, but eased to 8.6 percent in February, 7.6 percent in March, 6.6 percent in April and 6.1 percent in May.
“Inflation is stickier in [the] Philippines compared to the rest of the region. However, at this juncture, if inflation trend remains under control, we assess the Bangko Sentral ng Pilipinas to stay on hold for the rest of 2023,” Cheo said.
The Monetary Board of the Bangko Sentral ng Pilipinas is scheduled to hold a policy meeting on June 22.
Moody’s Corp.’s subsidiary Moody’s Analytics predicted the BSP might join other central banks in the region in keeping the policy interest rates unchanged this week on decelerating inflation.
“Central banks in Indonesia and the Philippines will keep their respective policy rates on hold in June. Lower food and fuel prices have cooled headline inflation in those economies, giving the central banks space to hold monetary policy settings steady,” it said.
The interagency Development Budget Coordinating Committee earlier brought down the average inflation rate assumption for 2023 to a range of 5 percent to 6 percent from a previous estimate of 5 percent to 7 percent.
Inflation is seen to return to the target range of 2 percent to 4 percent by 2024 until 2028 as the Marcos administration, through the newly constituted Interagency Committee on Inflation and Market Outlook, provides proactive measures to address the main drivers of inflation.
Core inflation―which is the change in prices of goods and services except for those from the food and energy sectors―-also continued to decelerate on a sequential basis.