BSP likely to keep policy rates steady

The Bangko Sentral ng Pilipinas (BSP) is widely expected to keep the key interest rate at its current level on Thursday to mitigate possible inflationary pressures and to support the peso against the dollar.

- KEISHA TA-ASAN

Sunny Liu, lead economist at Oxford Economics, said the BSP will likely keep the target reverse repurchase rate at a 17year high of 6.5 percent during its meeting on June 27.

"We think inflation pressures and the weak currency will continue to constrain the capability of the BSP to cut interest rates," she said, adding that the BSP is expected to start easing by the fourth quarter. However, it may cut earlier this year if inflationary pressures are under control.

Bank of the Philippine Islands (BPI) lead economist Jun Neri said it is unlikely for the BSP's Monetary Board to change its policy settings on Thursday, but their post-meeting statement may continue to be less hawkish than their rhetoric early this year.

"The BSP can afford a more dovish slant on Thursday following downside surprises on headline inflation prints for April and May. Lower power prices and slower annual increases in rice prices for June may actually lead the BSP to increasingly hint on an August rate cut," he said.