June 18, 2024

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Another rate hike may be needed to fight inflation

2 min read

By Keisha B. Ta-asan, Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) may be compelled to resume monetary tightening next month to mitigate inflationary pressures, although a likely pause by the US Federal Reserve could ease the pressure on the BSP to hike further, analysts said. 

Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said there are more upside risks to inflation such as rising oil prices due to heightened geopolitical tensions in the Middle East.

“(We) may need more (rate) hikes to suppress inflation,” he said in a Viber message.   

GlobalSource Partners Country Analyst Diwa C. Guinigundo said inflation’s upward trend may continue after the spike seen in August and September, as well as higher electricity rates, transport fares, and wages.

“On top of that, the latest forecasts of the BSP for the next two years are uncomfortably above the midpoint of the official (2-4%) inflation target, something that could upset inflation expectations,” he said in a Viber message.

“With the BSP’s suggestive forward guidance, it looks like the BSP is set to resume tightening monetary policy. To me, that is most appropriate,” he added.

BSP Governor Eli M. Remolona, Jr. earlier said he is not ruling out a 25-basis-point (bp) rate hike at its Nov. 16 meeting, after inflation accelerated for a second straight month in September to 6.1%.

September marked the 18th straight month that inflation exceeded the central bank’s 2-4% target. Year to date, inflation averaged 6.6%.   

The BSP sees average inflation at 5.8% this year, before declining to 3.5% in 2024 and 3.4% in 2025.   

Mr. Remolona has also hinted at the possibility of an off-cycle rate hike, but the BSP still needs to review the latest data before making a policy decision.

China Banking Corp. Chief Economist Domini S. Velasquez said they have raised their average inflation forecast to 5.9% for 2023, slightly higher than the BSP’s projection.

“We do think there is an…

BusinessWorld

2023-10-22 12:33:32

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