MANILA -- As price pressures wane, causing inflation to fall back to only 5.1 percent last December, an economist of ING Bank, N.V. Manila forecasts a strong reversal in the Bangko Sentral ng Pilipinas’ (BSP) policy decisions, which saw a 175-basis point hike in key rates in 2018.
In a report, ING Bank N.V. Manila senior economist Nicholas Mapa said deceleration of domestic rate of price increases provides the BSP leeway to cut key policy rates as early as the May 9 rate setting meet of the policy-making Monetary Board (MB).
The forecast slash in the BSP’s policy rates this year is seen to “help bolster slowing growth momentum with its price stability mandate safeguarded.”
The cut is on top of the projected 200 basis points reduction in banks’ reserve requirement ratio (RRR) this year, Mapa said.
“With market anticipating a less aggressive Fed rate hike cycle in 2019, BSP may be afforded a window to walk back its own aggressive rate hike salvo from 2018,” he said.
Mapa also explained that anticipations for both the policy rate and RRR cuts this year will further increase if inflation continues to go down, if Fed become more dovish and if growth momentum slows.
“With our inflation forecasts likely to be lowered given recent price trends, we will be revisiting our forecast for BSP policy in 2019 as well,” he added.
ING currently forecasts Philippines 2019 inflation rate to average at 3.6 percent, within the government’s two to four percent inflation target for 2018-20. (PNA)
