The Bangko Sentral ng Pilipinas is widely seen to hike its key interest rates to curb higher-than-expected inflation in its next monetary setting on Aug. 9.
Many say it’s now just a question of whether it will deliver the usual 25-basis point increase or will go for a more aggressive 50-basis point hike.
With year-on-year inflation rate hitting a five-year high of 5.2 percent in June, British banking giant HSBC said a “more forceful” response from the inflation-targeting Philippine central bank may be expected as the “June stock” had broad implications.
“We expect a 50-bp (basis point) rate hike at its next policy meeting (presumably in August) in recognition that inflation is now significantly higher than initially expected and to show the central bank’s resolve to curtail it as soon as possible,” HSBC said in a research note dated July 17.
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“We see a 25-bp hike as largely priced in, while a 50-bp rate hike would be seen as more preemptive as it takes into account that inflation will be higher over the near term and be above target for longer than expected—not merely as a reaction to higher-than-expected prices in June,” the research said.
HSBC now sees inflation peaking at about 5.5 percent, while core inflation is seen to hover above 4 percent all the way to the first quarter of 2019.
