NextGen Day

HSBC projects two 25 basis point rises in the Bangko Sentral ng Pilipinas’s benchmark interest rates until May of this year before the monetary authorities halt the rate hikes due to expectations for a persistent acceleration of domestic inflation.

BSP Governor Felipe Medalla has predicted ongoing rate increases given that the rate of price increases has been rising, with the January 2023 figure surprising at 8.7 percent, a new 14-year high, according to a report from HSBC Global Research dated February 16.

According to estimates, inflation reached a potential peak in December 2016 at 8.1 percent.

According to the HSBC research, “we anticipate the BSP to hike rates until stopping at 6.50 percent by May as non-monetary initiatives on food supply finally acquire some traction but risks linger.”

The Monetary Board (MB), which sets policy for BSP, raised the key interest rates by 50 basis points on Thursday after taking note of the higher-than-anticipated domestic inflation rate in January and upside risks both locally and internationally brought on by supply-side factors and the country’s ongoing economic recovery.

One example is that the overnight reverse repurchase (RRP) rate at the BSP is currently 6.5 percent, the same as it was in 2007.

According to the paper, as a result of the domestic economy being further opened up following the application of movement limitations beginning in early 2020 due to the pandemic, there are concerns associated with supply-side inflation as well as demand-side pressures.

“The BSP’s fight is not yet finished,” it declared, citing a 14-year high in inflation and a 46-year high in growth.

The central key rates are expected to rise by 25 basis points during the MB’s rate-setting meetings in March and May, according to HSBC Global Research.

This is because it predicts the first quarter of this year as the inflation peak.

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