Banks expect BSP to keep rates steady

The Bangko Sentral ng Pilipinas (BSP) is likely to keep interest rates steady next week as inflation surprised on the downside at 4.9 percent in October, but foreign banks economists warned that risks of another rate hike remains.

- LAWRENCE AGCAOILI

Nalin Chutchotitham, economist for the Philippines at Citi, said the BSP’s Monetary Board is likely to stand pat during the rate-setting meeting scheduled on Nov. 16 after delivering a 25-basis-point offcycle hike last Oct. 26.

“We see the BSP standing pat in November after bringing forward its rate hike to October in an off-cycle move. Some risks of another hike remains as the BSP aims to better anchor inflation expectations,” Chutchotitham said.

Chutchoti tham added that the inflation outturn last month was better than the 5.6 percent market expectation and the BSP range of 5.1 to 5.9 percent.

Despite easing in October after quickening for two straight months to 5.3 percent in August and 6.1 percent in September from a year low of 4.7 percent in July, the growth in the consumer price index averaged 5.4 percent during the 10-month period and stayed above the central bank’s two to four percent target range. Chutchotitham pointed out that the BSP remains somewhat hawkish as it wants to see a sustained downtrend in inflation and a better-anchored inflation expectation.

Monetary authorities, she said, also reiterated preparedness for follow-through monetary policy action, as necessary to prevent additional second-round effects.