{"id":151969,"date":"2018-02-09T22:01:55","date_gmt":"2018-02-10T03:01:55","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=151969"},"modified":"2018-02-09T22:01:55","modified_gmt":"2018-02-10T03:01:55","slug":"bmi-research-sees-50-bps-hike-in-bsp-rate","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2018\/02\/09\/bmi-research-sees-50-bps-hike-in-bsp-rate\/","title":{"rendered":"BMI Research sees 50 bps hike in BSP rate"},"content":{"rendered":"
\"The<\/a>
The research unit of Fitch Group on Friday said it is inevitable for the Bangko Sentral ng Pilipinas (BSP) to raise its key rates by about 50 basis points this year amid inflation pressures and Federal Reserve\u2019s tight monetary policy. (Photo<\/a>: Bangko Sentral ng Pilipinas\/Facebook<\/a>)<\/figcaption><\/figure>\n

MANILA — The research unit of Fitch Group on Friday said it is inevitable for the Bangko Sentral ng Pilipinas (BSP) to raise its key rates by about 50 basis points this year amid inflation pressures and Federal Reserve\u2019s tight monetary policy.<\/p>\n

\u201cWe believe that the window for further rate-hold is quickly narrowing,\u201d BMI Research said in a study.<\/p>\n

The study noted it considered the faster rate of price increases in the first month this year as \u201cmore than just cyclical factors, and was in part due to sustained high credit growth as a result of the ultra-accommodative monetary policy stance.\u201d<\/p>\n

Inflation rate last month picked up to 4 percent, the upper end of the government\u2019s 2 to 4 percent target band for \u200e2017-2019, from last December\u2019s 3.3 percent.<\/p>\n

\u201cTogether with higher oil and commodity prices, we expect inflationary pressures to remain elevated, and this will likely prompt the BSP to tighten its monetary policy to keep inflation under control,\u201d it said.<\/p>\n

BMI Research said inflation \u201cis likely to head higher if nothing is done\u201d.<\/p>\n

It forecasts rate of price increases to average at 4 percent this year.<\/p>\n

\u201cAs the US (United States) Fed stays on its tightening path, we expect the BSP to hike interest rates by 50 bps to 3.50 percent by end-2018 to safeguard both currency and macroeconomic stability,\u201d it said.<\/p>\n

Another factor cited by BMI Research as a reason for its rate hike projection this year is the yield of government-issued two-year bond, which it said, has \u201crisen considerably\u201d since the third quarter of last year.<\/p>\n

It said yield of the three-year T-bond rate is now about 100 basis points higher than the central bank\u2019s reverse repurchase (RRP) rate.<\/p>\n

On Thursday, the central bank\u2019s policy-making Monetary Board (MB) kept anew the BSP\u2019s key rates, placing the RRP still at 3 percent, the repurchase (RP) rate at 3.5 percent, and rate of the special deposit account (SDA) at 2.5 percent.<\/p>\n

Monetary officials also increased the central bank\u2019s average inflation forecast for this and next year to 4.34 percent and 3.49 percent for 2018 and 2019, respectively, higher than the previous 3.4 percent and 3.23-percent projections.<\/p>\n

They considered the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) law in the revised inflation forecast.<\/p>\n

\u201cGiven that inflation expectations are rising and real interest rates have already dipped into negative territory, we believe that the BSP might find itself increasingly behind the curve as it continues to delay tightening its ultra-loose monetary policy,\u201d said BMI Research.<\/p>\n

It also noted that the local currency, which is now trading at 51-level against a greenback, continues to underperform against the United States (US) dollar \u201cand is looking to retest near-term support.\u201d<\/p>\n

\u201cGiven that bond yields in the US are rising aggressively and the Fed is likely to further tighten its monetary policy (we forecast three 25bps hike in 2018), this will likely exert further downside pressure on the PHP (Philippine peso) against the dollar,\u201d it added.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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