BSP revising inflation forecasts for ’11, ’12
The Bangko Sentral ng Pilipinas will revise its inflation forecasts for this year and next, which will be the basis in deciding whether to increase its policy rates or keep them at current levels.
BSP Governor Amando M. Tetangco Jr. said in an interview that the Monetary Board, which will meet on policy rates on June 16, would assess inflation expectations and the impact of the past two rate increases.
Monetary authorities hiked the BSP rates twice by 25 basis points, bringing the overnight borrowing rate to 4.5 percent and the overnight lending rate to 6.5 percent.
“We will consider the inflation outlook and inflation expectations to see if there is a need for further action or not,” Tetangco said.
“If we need to move, we will look at the options available—the instruments included in the BSP’s toolkit, such as changes in the policy rates themselves or the reserve requirements for banks,” he said.
The BSP chief said the latest data on consumer prices—which showed that inflation increased to 4.5 percent in May from 4.3 percent in April—indicated that “inflationary pressures still exist.”
Tetangco said the concurrent increase in core inflation—which measures changes in consumer prices excluding the items such as food and fuel, which are subject to volatile price movements—strengthened the belief that inflation was likely to increase further.
“We will also look at developments in the US economy and the pace of recovery in other advanced economies, and their implication on the Philippine economy,” he said.
Last week, Standard Chartered Bank and UBS Securities both said they expected Philippine monetary authorities to raise policy rates by 25 basis points this week.
This would bring the BSP’s overnight borrowing rate to 4.75 percent and the lending rate to 6.75 percent.
Also, both agencies said the BSP was expected to raise its rates twice more—in 25-basis point increments—in the second semester.
This would mean the borrowing rate would climb to 5.25 percent while the lending rate would rise to 7.25 percent.
