THE Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, may keep the policy rate unchanged in its meeting this week on the back of manageable inflation and robust economic growth, DBS Bank of Singapore said Monday.
“Global interest rates have been rather orderly in the past month, providing the central bank some room to further delay its policy tightening,” DBS said in a report.
“Besides, CPI inflation remained steady at 3.4 percent [year-on-year] in April, prompting the BSP governor to indicate that no policy change is likely on Thursday,” the bank said.
DBS said it would be interesting to see how the Bangko Sentral would respond to the first-quarter GDP data to be released later this month, especially if it came in better than expected. It said all signs continued to point toward consumption growth staying above 6 percent and investment expansion in the double-digits.
“Overall GDP growth is still set to come in around 6.5 percent this year, with some expecting even higher prints. Expect the policy statement to get increasingly hawkish. The BSP has started to do some of that in March, by noting a stronger peso appears likely this year, given stronger fundamentals,” it said.
It said if tolerance for a weak peso might have been a strong reason to delay the hikes in the previous meetings, this would no longer be the case going forward. “At this juncture, we still look for a total of 50bps rate hikes this year,” it said.
The bank also said that the change in the Bangko Sentral governorship in July 2017 could be a factor that may push any hike to the second half of the year. Bangko Sentral Governor Amando Tetangco Jr. will end his second six-year term on July 2.
Inflation in April remained at 3.4 percent, the same rate a month ago, as slower increases in the rest of commodity groups offset increments in the prices of food, transport and communication. But the April inflation was significantly faster than the 1.1 percent a year ago. It also remained the fastest in more than two years since the 3.7 percent in November 2014.