NextGen Day

The major policy rates of the Bangko Sentral ng Pilipinas (BSP) are expected to increase by 75 basis points in the first half of this year, according to an analyst with HSBC, despite the fact that the domestic inflation rate is anticipated to have peaked in December.

Aris Dacanay, an economist with HSBC for the Association of Southeast Asian Nations (ASEAN), said in a virtual briefing on Wednesday that while food inflation remains the main driver of price increases, core inflation, which excludes volatile food and oil items, accelerated by 6.9 percent year-over-year in December, raising expectations for further increases in the key rates set by the central bank.

In reference to the seven-member Monetary Board of the BSP, which sets policy, he added, “We believe BSP will boost rates by 25 basis points in each of the next three meetings.”

The dates of the MB’s first three sessions this year are February 16, March 23, and May 18.

In order to combat the high inflation rate and maintain the BSP’s interest rate divergence with the US, the Board increased the BSP’s key rates by a total of 350 basis points last year.

This is due to the fact that inflation was rising and broke the government’s goal range of 2 to 4 percent in April 2022 when it escalated to 4.9 percent.

Domestic price growth increased even more in December of last year, from 8 percent to 8.1 percent year over year, bringing the annual average up to 5.8 percent.

According to Dacanay, supply issues with a number of food staples contribute to the continued elevated risk of inflation.

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