The Bangko Sentral ng Pilipinas is likely to increase interest rates in the second half of the year because of rising inflation rate, Japanese financial holding company Nomura said in a report Tuesday.
“We reiterate our forecast of a total of 50 basis points in rate increases in the second half of the year [i.e. after Mr. Nestor Espenilla takes office in July]. We continue to see a clear case for policy rate hikes this year because of rising inflation risks,” Nomura said.
It said the appointment of Deputy Governor Nestor Espenilla Jr. as the successor of Governor Amando Tetangco Jr. who was set to retire on July 2 suggested no change in the regulator’s inflation-targeting framework.
The appointment of Espenilla announced by Malacañang Palace Monday was warmly welcomed by stakeholders in the domestic banking industry, saying this would ensure that the reforms instituted by the regulator for the past few years would continue.
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, transportation and communication.
The April inflation, however, was faster than 1.1-percent registered a year ago and the highest in more than two years, or since it hit 3.7 percent in November 2014.
The Bangko Sentral earlier predicted that inflation this year would settle between 2 percent and 4 percent.
National Economic and Development Authority Undersecretary for investment programming Rolando Tungpalan said the stable inflation rate in April was a respite from the upward inflation trend seen in the first three months of the year. Julito G. Rada
The policy-setting Monetary Board of Bangko Sentral kept the benchmark interest rates unchanged its its last meeting on March 23 given the robust domestic economic growth and manageable inflation environment. The board is set to meet again on May 11.