BSP likely to keep rates steady in this year’s last policy meeting

The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, is expected to keep the benchmark interest rates steady in its last policy meeting for the year, a unit of Fitch Group said Monday.

Fitch Solutions Macro Research said the Bangko Sentral might keep its overnight borrowing rate on hold at 4.75 percent, following a 25-basis point hike during the November meeting, which brought the total increase for the year to 175 basis points. 

“We believe that the BSP’s 25 bps hike in November was a pre-emptive move to the US Fed likely 25 bps hike in December. Combined with the recent decline in crude oil prices, this is likely to provide room for the BSP to remain on hold in December, barring any global risk-off event,” Fitch said.

It also said the government’s move to ease the rice import rules would help to rein in inflation, which eased to 6 percent in November from 6.7 percent in October while remaining above the Bangko Sentral’s 2 percent to 4 percent target range.

“The continued high inflation rate informs our expectation for the BSP to resume its tightening cycle in 2019, with 50 bps worth of rate hikes over the year, aimed at bringing prices down to more manageable levels,” it said.

Inflation in November eased to a four-month low of 6 percent from a nine-year high of 6.7 percent in October, pulled down by slower increases in food and fuel prices, the Philippine Statistics Authority said.

This brought the average inflation rate in the first 11 months to 5.2 percent, still higher than the target range of 2 percent to 4 percent this year.

Bangko Sentral Governor Nestor Espenilla Jr. earlier said the November inflation print at 6 percent was “very encouraging.” 

“For the first time, we are seeing significant negative month-on-month growth after inflation plateaued at around 6.7 percent,” he said.

“It confirms that inflation is heading back to the 2 to 4 percent target range in response to decisive non-monetary measures to curb food prices as well as favorable recent developments in highly volatile international oil prices,” Espenilla said in a message to reporters. 

He said the strong monetary action significantly reinforced the anti-inflation process through the expectations route and a firmer peso.

Topics: Monetary Board , Bangko Sentral ng Pilipinas , Fitch Solutions Macro Research , Nestor Espenilla Jr.
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