Think tank sees BSP keeping rates on hold

MANILA, Philippines — UK-based think tank Pantheon Macroeconomics expects the Bangko Sentral ng Pilipinas (BSP) to keep interest rates on hold after the off-cycle rate hike on Thursday.

“We’re sticking to our view that the Monetary Board will hold at its scheduled meetings in November and December,” Pantheon Macroeconomics said in its Emerging Asia Economic Chartbook for October 2023.

The Monetary Board is scheduled to meet on Nov.16 and Dec.14 to discuss policy.

The think tank also said it is keeping its yearend benchmark policy rate forecast of 5.50 percent for next year.

After keeping rates steady for four straight policy meetings, the BSP delivered an off-cycle 25-basis-point rate hike on Thursday, with inflation expected to go beyond targets for this year and next year.

This brought the benchmark interest rate to 6.50 percent, the highest in 16 years.

For Pantheon Macroeconomics, the rate increase is unnecessary as the surge in rice prices or the main shock to inflation in recent months has reversed and is stabilizing.

It also said “there still is no evidence of any second-round effects let alone additional ones – looking at the ongoing slowdown in core inflation and still-improving trends at the margin.”

Core inflation, which strips off selected food and energy items, decelerated to 5.9 percent in September from 6.1 percent in August.

The country’s headline inflation rate, meanwhile, climbed for a second straight month to 6.1 percent in September from the previous month’s 5.3 percent, driven mainly by food prices including rice.

From January to September, the average inflation rate stood at 6.6 percent, higher than the BSP’s two to four percent target range for the year.

Earlier, National Economic and Development Authority Secretary Arsenio Balisacan warned against further rate hikes as this could hurt the economy, consumers and producers.

He said interest rates “affect the economy both immediately and in the longer term. That’s why wehave to be very careful.”