INTERNATIONAL banks shared mixed views on the Bangko Sentral ng Pilipinas’s (BSP) potential policy move in response to the slightly higher, but still relatively tame, inflation rate in February this year.
In separate research notes, Barclays and JPMorgan both said that the February inflation, at 2.5 percent, was in line with their own market expectations.
However, JPMorgan is skewed to predicting that the BSP will likely lower its rates, while Barclays said it is maintaining its forecast of a hike in the central bank’s overnight policy rates within this year.
In particular, economists in Barclays Research said that, while the BSP appears to remain comfortable with its current monetary-policy stance, they still see a policy-rate hike taking place in the fourth quarter of this year.
The forecast was unchanged from their earlier projections, taking into consideration the BSP’s adjustment of its own rates to the expected normalization of monetary policy in the US.
Barclays also noted that, while inflation remained relatively tame, at 2.5 percent compared to the 2.4 percent seen in the previous month, core inflation—or the measure of inflation without the volatile products—registered a steeper jump at 2.5 percent, from 2.2 percent.
Barclays also noted that they noted the clearing of the Manila Port congestion, saying that this development removed a key headwind to export growth in the country.
Manwhile, JPMorgan said that while inflation slightly picked up in February, they see it going down again toward the end of the year.
“JPMorgan expects that inflation could fall well below the lower inflation bound of 2 percent in third quarter 2015,”
JPMorgan said.
“This could provide room for the BSP to ease during third quarter of 2015, especially if capital outflows remain manageable following the Fed funds hike in second quarter of 2015, amid a comfortable current-account buffer provided by lower oil imports,” it added.
The BSP projects inflation to hit 2.3 percent at the end of the year, as forecasted in its earlier policy meeting on February 12 this year.
This is still within its target range of 2 percent to 4 percent on average for 2015.
The BSP is set to hold its next policy meeting on March 26.