The Bangko Sentral ng Pilipinas (BSP) is seen keeping its rates steady until the fourth quarter of the year, when it is expected to tackle the spur of inflationary pressures due to price movements and the base effect from last year.
“We believe the BSP will hold rates steady as a dreadful base is ahead in the fourth quarter of 2015,” said Hongkong and Shanghai Banking Corp. (HSBC) economist Trinh Nguyen in a research note.
The HSBC economist is referring to the decline in inflation in the last quarter of 2014 to 2.7 percent due to the sharp reduction in oil prices.
Aside from the so-called dreaded base, oil prices are also beginning to rise again, threatening the government’s 2-percent to 4-percent inflation target for the year.
Some economists also fear a spike in the prices of agricultural products, as the El Niño phenomenon is expected to take its toll on the country’s farm production, particularly rice.
The BSP has kept all its policy rates since October last year.
Current monetary-policy settings are at 4 percent for the overnight borrowing, or the reverse-repurchase facility, and 6 percent for the overnight lending or repurchase facility.
The BSP will be having its next monetary-policy meeting on June 25. This will be the fourth monetary-policy meeting of the BSP for the year.
The Philippine Statistics Authority, meanwhile, is expected to release the May inflation data on Friday.
Nguyen’s forecast on the Philippines’s inflation is at 1.9 percent.
“We expect food-price pressure to be subdued,” Nguyen said. “HSBC’s forecast is within the BSP’s May forecast range of 1.7 percent to 2.4 percent.”