BSP rates to climb further-- ANZ

November 08, 2018

Economic think tank ANZ Research still forecasts another increase in the Bangko Sentral ng Pilipinas’ (BSP) key policy rates, by 25 basis points, in December 2018 even if it turns out that domestic inflation has hit its peak in October.

In a study released Tuesday, the Australia, New Zealand and Asia-focused research firm noted the flat year-on-year movement of domestic rate of price increases in the 10th month this 2018 at 6.7 percent. “We now think that inflation has peaked,” it said.

The report said the latest inflation figure is higher than market expectations of 6.6 percent, but the month-on-month change posted the slowest in four months at 0.3 percent.

Even with the flat inflation rate last October, average inflation in the first 10 months this year rose to 5.1 percent from end-September’s 5 percent.

The government’s inflation target until 2020 is a range between 2-4 percent.

ANZ also noted that inflation of rice last October slowed to 6.3 percent year-on-year, the first time in 11 months. A spike in the staple's price became a major driver of domestic inflation in past months.

The report, meanwhile, cited that although rice inflation has slowed core inflation, with excludes volatile oil and food, posted the highest level since April 2009 at 4.9 percent last October from the previous month’s 4.7 percent.

Despite the possible peaking of inflation, the report said bringing the level to within the government’s target band “will nonetheless, require more policy response in our view.” “We expect a final rate hike of 25 bps to 4.75 percent at their December meeting,” it added.

The MB will have its last rate setting meet this year on December 13.

To date, it has increased the BSP’s key policy rates by a total of 150 basis points due to sustained rise of inflation rate.