MANILA - An economist of DBS Bank Ltd. on Friday expressed doubt that the Bangko Sentral ng Pilipinas (BSP will raise its key rates when the Monetary Board meets  on Sept. 21, 2017.

DBS Group Research economist Gundi Cahyadi, however, said a hike is possible in the last quarter this year and the first quarter of 2018.

Cahyadi said the BSP has maintained its key rates, so far this year and this will likely be the case this month.

Rate of the BSP's reverse repurchase (RRP) facility is now at three percent; repurchase (RP) facility at 3.5 percent, and  2.5 percent for  the special deposit account (SDA). The three facilities represent the central bank's Interest  Rate Corridor (IRC), put in place in June 2016.

Cahyadi said Philippine monetary officials may maintain key rates next week even as he considers the BSP to be "slightly behind the curve in policy tightening."

"While a move is still unlikely next week, we reckon there is a good chance for a 25 bps (basis points) rate hike each in both 4Q17 and 1Q18,"he said.

The economist said rate of price increases last June and July, at 2.7 percent and 2.8 percent, respectively, gave the BSP leeway to maintain its key rates.

Last August, inflation further rose to 3.1 percent, bringing the year-to-date average to 3.1 percent.

Another positive factor for keeping the key rates steady is the liquidity situation in the banking system, he said.

Central bank data shows that outstanding loans of commercial banks, net of placements with the BSP's reverse repurchase (RRP) facility, rose by 19.7 percent last July from the previous month's 19 percent.

Domestic liquidity during the same period increased by 13.5 percent from month-ago's 13.3 percent.

"More importantly, the upward pressure on global rates may also gain dominance going into 2018," the study said.

Cahyadi said the upward interest rate pressure around the world "may put pressure on the peso to weaken further."

He said the local currency, which ended Thursday at 51.165 to a greenback, has weakened by around 2.8 percent to the US dollar to date making it the weakest in the region.

"We don't expect the BSP to stay tolerant of further peso weakness, amid the potential negative impact on investment-related import demand," he added. (PNA)