Oxford Economics expects the Bangko Sentral ng Pilipinas (BSP) to raise interest rates in April as price pressures broaden, despite the bank recently maintaining its benchmark rate to support a fragile economic recovery.
The BSP held its policy rate steady at 4.25 percent during an unscheduled meeting on March 26. The decision reflected concerns regarding weak economic growth even as inflation risks remain largely driven by supply-side issues.
Oxford Economics assistant economist Jun Hao Ng said in a report that while the risk of a more dovish stance has increased, the BSP’s policy calculus will likely shift in favor of a hike at the next meeting on April 23.
“While risks towards a more dovish stance have clearly increased, we think price pressures will broaden from hereon and shift the central bank’s policy calculus in the next meeting [April 23] in favor of a hike,” Ng said.
“Any shift in the policy stance would likely depend on the emergence of second-round effects. We think this will be more pronounced than the BSP currently expects and therefore maintain our expectation of a 25 bps rate hike in April,” Ng said.
