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BSP rates seen to rise by 75 bps next year

By Joann Villanueva

June 22, 2021, 6:53 pm

MANILA – Bangko Sentral ng Pilipinas’ (BSP) key rates are expected to rise by 75 basis points in 2022, with the first hike seen in the first quarter.
 
HSBC Private Banking and Wealth Management managing director Fan Cheuk Wan said they also continue to forecast a 6.3-percent growth for the Philippine economy this year and 6.5 percent in 2022 in line with the projected recovery of Asian economies. 
 
“That’s why, we factor in the interest rate hike given the sustained cyclical recovery,” she said in a virtual briefing on Tuesday. 
 
To date, the central bank’s overnight reverse repurchase (RRP) rate is at record-low of 2 percent. 
 
BSP’s key rates have been slashed by a total of 200 basis points last year as part of the central bank’s contribution to help buoy the domestic economy from the impact of the virus-induced pandemic. 
 
Its overnight lending rate is currently at 2.5 percent and the overnight deposit rate at 1.5 percent. 
 
Economic managers are confident of a recovery of the domestic economy this year, with the target set between 6-7 percent.
 
The domestic economy, as measured by gross domestic product (GDP), contracted by 9.5 percent last year, with all quarters posting negative prints. 
 
After dipping to its decade-low 17 percent in the second quarter of last year, the economy has been posting improvements with the first quarter 2021 print at -4.2 percent.
 
Meanwhile, Wan said they expect domestic inflation to plateau after the BSP tightens policy rates, with the average rate seen at 3.5 percent by the end of 2021 and 2022. 
 
In the first five months this year, the rate of price increases averaged at 4.4 percent. 
 
Inflation surpassed the government’s 2-4 percent target band starting last January when it accelerated to 4.2 percent from the previous month’s 3.5 percent. 
 
Its five-month rise started in October last year and peaked at 4.7 percent last February, which is also the highest so far this year. 
 
It has been steady at 4.5 percent from March to May. 
 
Monetary officials expect inflation to remain elevated until the third quarter of the year and they project this year’s average to be at 3.9 percent. 
 
Average inflation for next year is projected to be at 3 percent. (PNA)
 
 

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