Moody’s Analytics, which operates independently of the Moody’s Investors Service credit rating agency, said Monday it expects the Bangko Sentral ng Pilipinas to raise the policy rate by 25 basis points to 2.5 percent on Thursday to control the rising inflation..
Moody’s Analytics’ projection was not as aggressive as other analysts, which predicted the BSP might raise the rate by 50 basis points to 2.75 percent, in reaction to the US Federal Reserve’s move of hiking interest rate by 0.75 percentage point last week, the biggest adjustment since 1994.
“We expect the Philippine central bank to lift its policy rate by 25 basis points to 2.5 percent in June in response to the pickup in imported inflation,” Moody’s Analytics said in a report.
“This will be a quieter week in the Asia-Pacific region. Monetary policy decisions by central banks in Indonesia and the Philippines will be the highlight on the economic calendar,” it said.
Local economists earlier said the BSP might pursue a more aggressive stance of raising the policy rate by 50 basis points in the wake of the Fed’s move.
Analysts from the Bank of the Philippine Islands said in a report that hiking the policy rate gradually in contrast to what the Fed was doing “might exacerbate the headwinds affecting the Philippine economy.”
“We now expect a 50 bp hike from the BSP in its June meeting given the latest move of the Fed… A very narrow gap between US and local interest rates will likely exert more pressure on the peso, which will eventually translate to more inflation,” the bank said.
BPI said consumer prices would be likely more sensitive now to exchange rate movements as the economy was becoming more reliant on imported products like oil, rice and pork.
“A higher inflation print in the future may force the BSP to do bigger rate hikes and even inter-meeting rate hikes that may cause volatility in the markets,” the bank said.
