MANILA, Philippines — There is a high probability that the Bangko Sentral ng Pilipinas will lift policy rates in the second quarter, with inflation seen piercing the government’s target despite bullish growth outlook for the Philippine economy, a research firm said.
“With inflation breaching the 4 percent upper limit of the BSP target, it is now more likely that the Monetary Board will raise its policy rates by 25 basis points in Q2,” economists at the First Metro Investment Corp. and the University of Asia & the Pacific said in an April report.
Nonetheless, analysts said they expect the economy to register a strong first quarter and full-year growth, “as January data and other indicators appear to signal an acceleration.”
“Investment spending, powered by elevated government infrastructure outlays and double-digit growth (+25.2%), should carry on being the main driver of the PH economic growth,” FMIC and UAAP economists said.
“Despite a slight easing in consumer sentiment for Q1, the huge employment boost and robust OFW remittances (esp. in peso terms) should provide fuel for revved up consumer spending,” they added.
As anticipated, the BSP last month left key rates unchanged, dashing expectations from a growing number of market watchers who call for a monetary policy tightening to tame building price pressures.
But early this month, the central bank said it was evaluating the appropriateness of a “measured policy response” after inflation, based on the 2012 consumer price index series, jumped to a five-year high of 4.3 percent in March.
Monetary authorities have set a 2-4 percent target range for annual inflation until 2020.
The Philippine Statistics Authority is scheduled to release the first-quarter economic data hours ahead of the BSP’s rate-setting meeting on May 10.