Banker: 2 More Rate Hikes Likely Before BSP Pause

Monetary authorities will likely raise key interest rates by 25 basis points (bps) next week and follow this up with an identical increase in March, an economist said.

Photo Insert: BSP Governor Felipe Medalla gives a talk on inflation.

The adjustments will be needed given still-high inflation, ING Bank Manila senior economist Nicholas Mapa said, adding after which the Bangko Sentral ng Pilipinas' (BSP) policymaking Monetary Board will likely hit pause on its tightening.

The adjustments will be needed given still-high inflation, ING Bank Manila senior economist Nicholas Mapa said, after which the Bangko Sentral ng Pilipinas' (BSP) policymaking Monetary Board will likely hit pause on its tightening.

"We expect BSP to hike by 25 bps at the February meeting and by another 25 bps possibly at the March 23 meeting given persistent price pressures," Mapa told reporters.

Although headline inflation is on the downtrend, "we zero in on high core inflation, and the fact that price pressures have spread to several items in the consumer price index basket," he added.

Consumer price growth hit a 14-year high of 8.1% in December. Results for January will be released by the Philippine Statistics Authority February 7. The BSP expects inflation to have hit 7.5 to 8.3% last month.

"Upward price pressures are expected to emanate from higher electricity rates, approved water rate rebasing, higher domestic petroleum prices, uptick in the prices of key food items and the annual increase in sin taxes," the central bank said last week.

"Meanwhile, the reduction in LPG (liquefied petroleum gas) prices as well as the peso appreciation could contribute to easing price pressures for the month," it added.

The median forecast in a poll of economists, meanwhile, was 7.6%, and the pressure to keep raising rates will have eased, they said, but additional increases can be expected as inflation will likely stay above target this year.

The key BSP interest rates were raised by a total of 350 basis points last year as inflation breached the BSP's 2.0- to 40.0% target and hit the government's upwardly revised 2022 forecast of 5.8%.

This year, economic managers expect inflation to stay above target at 4.5-to-5.5 percent and only return to the 2.0- to 4.0-percent range in 2024.

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