MANILA – Sustained acceleration of domestic inflation rate is expected as a main factor for a possible 50 basis points increase in the Bangko Sentral ng Pilipinas’ (BSP) key rates this week, Moody’s Analytics said.
“Bangko Sentral ng Pilipinas will increase the policy rate by 50 basis points to 6 percent in February as it tries to tackle still elevated headline and underlying inflation,” the economic research subsidiary of Moody’s Corporation said in its economic preview for the week covering Feb. 13 to 17, 2023.
The central bank’s policy-making Monetary Board (MB) will have its first rate setting meeting on Feb. 16 and it is widely expected to announce another rate increase given further uptick in inflation rate last January.
Last week, the Philippine Statistics Authority (PSA) reported that rate of price increases last January posted a faster pace of 8.7 percent, a new 14-year high.
This runs against expectations that inflation rate in the country likely peaked last December.
Moody’s Analytics said the central bank “will be aggressive in tackling inflation early in 2023.”
Its projected rate hike will bring the central bank’s overnight reverse repurchase (RRP) rate to 6 percent, a big jump after BSP cut it to record-low of 2 percent in 2020, to help cushion the impact of the pandemic on the economy.
“Odds are high that the monetary policy tightening cycle will run for longer in the Philippines than elsewhere in Asia given stubbornly elevated inflation,” Moody’s Analytics added. (PNA)