DBS says BSP to keep rates

MANILA, Philippines - Singapore-based DBS said yesterday it expects the Bangko Sentral ng Pilipinas to leave policy settings unchanged on Thursday amid the strong economy and manageable inflation environment.

“The Bangko Sentral ng Pilipinas is likely to maintain its monetary policy stance this week… At this juncture, we reckon that the central bank is quite comfortable with the current GDP (gross domestic product) growth and CPI (consumer price index) inflation dynamics,” the bank said in a research note.

DBS added it also does not see any change in the Special Deposit Account rate in the near-term.

The BSP in October and December last year kept key policy rates steady as inflation expectations fell within the targets until 2016. Earlier in 2014, the overnight borrowing and overnight lending rates were increased by 50 basis points as the inflation goals were in the risk of being breached.

Moreover, monetary authorities raised the banks’ reserve requirement ratios and the SDA rate last year to rein in excessive liquidity growth.

DBS said the robust economic growth, which accelerated to 6.9 percent in the final quarter of 2014 from only 5.3 percent in the third quarter, should keep the BSP from worrying about domestic consumption.

“Private consumption remains resilient and there is no reason why the BSP should be worried on this front,” DBS said.

“Indeed, we remain of the view that the central bank may actually prefer to tighten its policy further in the coming sessions,” the bank said.

The government hopes to grow the economy by seven to eight percent this year.