Although most economists say otherwise, London-based Standard Chartered Bank bared on Thursday a contrarian view on inflation, and ruled out a Bangko Sentral ng Pilipinas (BSP) interest-rate adjustment this year or next.
While in the Philippines, Standard Chartered economist Jeff Ng said he is convinced the BSP will not make the adjustments this year and next, essentially because inflations were to remain low and global volatilities likely persisting for some time still.
“I think this is nonconsensus, as well. We don’t expect policy-rate hikes for the rest of this year and also for the full of next year. I think some of the research houses are expecting a rate hike next year,” Ng said.
“We don’t see [inflation] going out of the 2-percent to 4-percent target [next year], which is why there is really no reason and no impetus for the central bank to do anything in the midst of global volatility and while expecting the Fed hike,” he added.
Ng also said the lender has scaled back its forecast inflation this year to only 1.5 percent, instead of 1.9 percent as bared earlier. This was similarly lower than target inflation set by the government, ranging from 2 percent to 4 percent this year, and certainly lower than the revised central bank forecast inflation of 1.6 percent this year.
The average inflation in the January-to-August period stands at only 1.7 percent. The September inflation print will be released by the Philippine Statistics Authority next week.
Ng also said the lender’s forecast inflation for 2016 has similarly been adjusted to 2.7 percent, from 2.5 percent originally.
This was within the government target inflation, ranging from 2 percent to 4 percent in 2016 but higher than the latest BSP inflation forecast of 2.6 percent for next year. At present, the central bank has kept the repurchase rate at 6 percent and the reverse repurchase rate at 4 percent. Its special deposit accounts rate stands at 2.5 percent.
Ng cited the country’s resilient growth despite “noisy” global environment. Ng looks forward to local output growth averaging unchanged at 5.7 percent for the Philippines.
For next year, Standard Chartered Bank forecasts growth averaging 6 percent. Both forecasts are below the government target of 7 percent to 8 percent for this year and next.