Poll: BSP to keep policy rate on hold

THE BANGKO SENTRAL ng Pilipinas (BSP) will likely keep interest rates on hold this week as inflation risks linger, according to most analysts polled by Business World.

- Katherine K. Chan

A Business World poll conducted last week showed 10 of 16 analysts expect the Monetary Board to pause monetary easing at its Oct. 9 meeting, keeping the benchmark rate at 5%.

On the other hand, six analysts anticipate a 25-basis-point (bp) rate cut, citing below-target inflation and the need to support economic growth. If realized, this would bring the benchmark rate to 4.75%.

The central bank has so far lowered borrowing costs by a total of 150 bps since the start of its easing cycle in August last year.

Security Bank Chief Economist Angelo B. Taningco said upside inflation risks would likely prompt the Monetary Board to hold rates steady on Thursday.

"I expect the Monetary Board to pause from rate cuts largely due to the inflation acceleration and upside inflation risks from potential extension of rice import ban and rice tariff hike," he said in an email.

September inflation data will be released on Oct. 7. A Business World poll of 12 analysts yielded a median estimate of 1.9% for September inflation, faster than the 1.5% in August, reflecting the impact of recent typhoons on food prices, as well as higher pump prices and electricity rates. This was within the BSP's 1.5-2.3% forecast for the month.

The 60-day suspension on imports of regular milled and well-milled rice took effect on Sept. 1. However, the import ban is expected to be extended by another 30 days.

Moody's Analytics economist Sarah Tan said a pause would allow the BSP to evaluate how its past rate cuts impacted the economy, particularly on domestic demand and lending activity.