London-based Capital Economics and British banking giant HSBC are expecting the Bangko Sentral ng Pilipinas (BSP) to hike its policy rate by another 25\u2026<\/b>
\nLondon-based Capital Economics and British banking giant HSBC are expecting the Bangko Sentral ng Pilipinas (BSP) to hike its policy rate by another 25 basis points to 3.5 percent in the monetary setting meeting on Wednesday.
\u201cHaving raised the rates at its meeting in May for the first time since 2014, we think the BSP will follow through with another hike [this] week. But as inflation is seen to peak soon, that will probably mark the end of this tightening cycle,\u201d Capital Economics said in a report on Friday.
\u201cThe Fed (US Federal Reserve) up to this point may have just been a secondary consideration for the BSP, but last night changes things,\u201d HSBC said in a research note dated June 14.
The bank was referring to the Fed\u2019s signal that it might raise rates twice more this year, whereas many were expecting only one more hike after last week\u2019s increase.
HSBC thus believes that the Fed\u2019s most recent guidance would \u201cfactor in heavily\u201d at the BSP\u2019s meeting on June 20, leading to the second 25-basis point rate hike for the year.
\u201cWe don\u2019t believe this marks the start of a tightening cycle for the BSP. In fact, we believe that with the exception of a more hawkish Fed and the recent dollar rally, domestic economic conditions no longer favor additional monetary tightening,\u201d the research noted.
Capital Economics noted that last week, BSP Governor Nestor A. Espenilla Jr. gave a \u201clittle indication of the [central] bank\u2019s next move, stating only that they will \u2018be examining closely all the potential drivers of future inflation.\u2019\u201d
While the headline rate nudged up last month to 4.6 percent, it came in lower than expectation, both Capital Economics and HSBC noted.
\u201cThe [BSP\u2019s] latest survey showed a slight moderation in inflation expectations,\u201d Capital Economics added.
HSBC said it would bode well for the BSP to strike a more neutral tone after this week\u2019s policy meeting \u201cto stem any significant outflows and further weakness to the currency.\u201d
\u201cThere are a few factors likely to push inflation higher over the next couple of months, including higher oil prices, a weaker peso and another increase in tobacco taxes,\u201d Capital Economics said.<\/p>\n

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Sentiment rank: 0.9<\/div>\n

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