The Bangko Sentral ng PIlipinas (BSP) is expected to raise its key rates by 25 basis points this week as domestic inflation remains elevated and both the supply and demand side risks still high.
In its economic preview for the week covering March 20-24, Moody’s Analytics said the Philippines “is battling some of the stickiest inflation in the Asia-Pacific region.”
The rate of price increases last February slowed to 8.6 percent but this was little changed from the 8.7 percent in the previous month, a 14-year high.
Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) hiked the central bank’s key rates by 50 basis points last February to 6 percent for the overnight reverse repurchase (RRP) rate, bringing the total rate increase since May last year to 400 basis points.
Moody’s Analytics said drivers of domestic inflation rate come from both the demand and supply side, with the influx of tourists, among others, resulting in higher demand for accommodation, transportation and restaurant meals and is contributing to the faster inflation rate.
On the supply side, prices of oil in the international market remain elevated due to economic developments overseas.
“With inflation still too high, BSP will want to prevent what it calls the emergence of additional second-order effects,” it said. “However, the small easing in inflation in February, which contrasted with BSP’s expectation for an increase, could give the central bank confidence to step it back.”
The Bangko Sentral ng PIlipinas (BSP) is expected to raise its key rates by 25 basis points this week as domestic inflation remains elevated and both the supply and demand side risks still high.
In its economic preview for the week covering March 20-24, Moody’s Analytics said the Philippines “is battling some of the stickiest inflation in the Asia-Pacific region.”
The rate of price increases last February slowed to 8.6 percent but this was little changed from the 8.7 percent in the previous month, a 14-year high.
Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) hiked the central bank’s key rates by 50 basis points last February to 6 percent for the overnight reverse repurchase (RRP) rate, bringing the total rate increase since May last year to 400 basis points.
Moody’s Analytics said drivers of domestic inflation rate come from both the demand and supply side, with the influx of tourists, among others, resulting in higher demand for accommodation, transportation and restaurant meals and is contributing to the faster inflation rate.
On the supply side, prices of oil in the international market remain elevated due to economic developments overseas.
“With inflation still too high, BSP will want to prevent what it calls the emergence of additional second-order effects,” it said. “However, the small easing in inflation in February, which contrasted with BSP’s expectation for an increase, could give the central bank confidence to step it back.”
Meanwhile, the joint publication of First Metro Investment Corporation (FMIC) and University of Asia and the Pacific (UA&P), The Market Call, in its March 2023 issue, said domestic inflation remains a concern.
It said while prices of some food items and transport cost decelerated in the second month this year, this was countered by the faster rise in prices of eggs and milk and other dairy products.
Core inflation, which excludes volatile food and energy items, accelerated to 7.8 percent in the second month this year from the previous month’s 7.4 percent.
CURRENTPH NEWS SERVICE
