Israel-Iran conflict may halt BSP easing

Israel's attack on Iran may pause monetary policy easing by the Bangko Sentral ng Pilipinas (BSP) while also weakening the peso, according to foreign banks.

- BY BEN ARNOLD DE VERA

"We think that the spike in oil prices on June 13 due to the Israel-Iran conflict is unlikely to derail the BSP's decision to cut this month, but it could weigh on the central bank's decision in the subsequent August meeting," Deutsche Bank Research economist Junjie Huang said in a June 14 report.

Deutsche Bank Research earlier projected the BSP's policy-making Monetary Board (MB) to cut key interest rates by 25 basis points (bps) each in its June 19 and Aug. 28 policy meetings.

For Huang, what is certain for now is Thursday's 25-bp reduction in the policy rate to 5.25 percent from 5.5 percent at present, mainly on the back of three consecutive months of below-target headline inflation.

The year-on-year rate of increase in prices of basic goods and services further fell to a 5.5-year low of 1.3 percent in May, bringing the five-month average to 1.9 percent—below the targeted two to four-percent range deemed manageable and conducive to economic growth.