By Tiziana Celine Piatos, December 12, 2022; Daily Tribune 

Bank economists see the need for the BSP policy-making Monetary Board to adjust the interest rate to a 50-basis-point hike this week to tame inflation.

Private economists said the Bangko Sentral ng Pilipinas should increase key interest rates once more this week as the country continues to struggle with inflation.

Hence, they anticipate that the Monetary Board will raise the bank rate by 50 basis points this week.

The BSP’s policy-making Monetary Board, which meets on 15 December, has so far raised key interest rates by 300 bps since May. The central bank’s policy rate currently stands at 5.0 percent.

Michael Ricafort, Rizal Commercial Banking Corp. chief economist, told Daily Tribune that the main objective of local policy rates to match future Fed rate hikes is to help stabilize both the peso and overall inflation.

He said the country’s economic team also aimed to prioritize the consumer price index through local interest rate hikes by matching partially or fully any future Fed rate hikes.

“There were also earlier signals of partially matching the widely expected +0.50 Fed rate hike (this week) amid the relatively stronger peso,” Ricafort added.

Inflation tamer
Domini Velasquez, China Banking Corp. chief economist, also sees the need for the Monetary Board to adjust the interest rate to a 50-basis-point hike this week to tame inflation.

Velasquez said core inflation, which does not include volatile food and energy prices, is still increasing and is expected to reach its peak in the first quarter of 2023. She opined that the BSP will continue its monetary tightening until early next year.

“Given three months of higher-than-expected inflation, we think the BSP will opt for a 50-bps rate hike to anchor inflationary expectations,” she said in a Viber message.

Nicholas Antonio Mapa, ING Bank Manila’s Senior Economist likewise said the Monetary Board will announce a 50-basis-point rise this week.

He pointed out that the Federal Reserve was generally anticipated to hike interest rates by 50 basis points next week and that BSP Governor Felipe Medalla had indicated a willingness to maintain a 100-basis-point difference with US interest rates.