MANILA – There is a need for the Bangko Sentral ng Pilipinas (BSP) to raise rates for a fourth time this year given the rising inflation environment in the country, strategists at Singapore-based DBS Group Research said.
In a market commentary, DBS strategists Duncan Tan and Philip Wee said the market has already discounted another 50-basis point hike at the next monetary policy on September 27.
“The Philippines need to raise rates again to rein in inflation,” they said.
“The central bank has a fair amount of tightening to do because monetary conditions have become loose after the higher-than-expected CPI inflation in August widened its gap against the overnight borrowing rate.”
Inflation came in at 6.4 percent in August, the fastest in over nine years since it clocked in at 6.6 percent in March 2009.
Current conditions warrant a change in monetary policy, said Cid Terosa, dean at the University of Asia and the Pacific (UA&P) School of Economics.
“I believe stronger and persistent measures have to be put in place to calm the agitated price environment,” Terosa told GMA News Online.
During its policy meeting last month, the BSP raised interest rates by 50 basis points, bringing the overnight borrowing rate to 4.00 percent, the overnight lending to 4.50 percent, and overnight deposits to 3.50 percent.
“Domestic rates have correspondingly increased 50-100 bps across the curve,” Tan and Wee noted.
For its part, the BSP said it was taking into close consideration the need for a fourth rate hike this year given the August inflation figures.
“Appropriate recommendations will be presented to the Monetary Board at its next policy meeting on September 27. It is most critical at this point to restore inflation back to the target range soonest and securely anchor inflationary expectations,” Espenilla said.
Last month, Budget secretary Benjamin Diokno said the inter-agency Development Budget Coordination Committee will also review the inflation target and forecast for the year. (GMA News)
