There should not be any surprises from Bangko Sentral ng Pilipinas (BSP) and from the policy-making Monetary Board when its members meet again on February 16 to decide on a policy stance.
The local markets anticipate the continued observance of the monetary-policy settings as inflation trends up and to the midpoint of the target range for the year and as local monetary officials themselves adapt a wait-and-see stance given the global events.
Various analysts see the BSP keeping the current 3-percent main policy rate in place, with no adjustments on the other levers, such as the banks’ deposit reserve ratio.
“While we expected the central bank to adjust rates higher earlier this year, the comments from various BSP officials suggest that the central bank has little intention of doing it for now,” Singapore-based DBS Bank Gundy Cahyadi said.
“Still, inflation is on a rise and GDP growth momentum is solid. No reason to keep rates at the current low levels, although the central bank seems to be comfortable with the peso on a slightly weaker tone,” he added.
Inflation has steadily risen since October 2015 and at rates within the target that year, in contrast to most months in 2016, when inflation proved lower than the 2- to 4-percent range of the government.
In particular, Cahyadi projected inflation to hit 2.6 percent in January this year, unchanged from the rate of change in prices last December.
In his monthly inflation forecast, central bank Governor Amando M. Tetangco Jr. said they see inflation falling within the 2.3-percent to 3.2-percent range for January.
“Downward price pressures include a slight decline in rice prices and lower power rates in Meralco-serviced areas,” Tetangco said.
“However, higher domestic prices of gasoline, diesel and LPG, as well as the excise-tax adjustments for alcoholic beverages and tobacco products would likely exert upside pressures on inflation during the month,” he added.
Cahyadi also said it should be interesting to hear the comments from the central bank coming out of the monetary-policy meeting.
An analyst also said markets are looking out for clues on whether a cut in the banks’ deposit reserve ratio is on the way, as enough volume has shifted from the erstwhile special deposit account (SDA) facility to the term deposit facility.
At the December 22 meeting, the central bank kept all policy rates frozen where they are, saying maintaining the monetary-policy settings at this juncture will “give the BSP more time to assess evolving economic developments and calibrate its policy tools as appropriate.”