BSP expected to keep policy rates unchanged | Inquirer Business

BSP expected to keep policy rates unchanged

By: - Business Features Editor / @philbizwatcher
/ 12:42 AM February 08, 2016

The Bangko Sentral ng Pilipinas may keep its key interest rates unchanged on Thursday—its first monetary policy meeting for the year—as inflation is seen to remain benign, an economist from Citibank said.

In January, the country’s year-on-year inflation rate eased to 1.3 percent from 1.5 percent in December.  It was within the BSP’s forecast range of 0.8-1.6 percent for the month.

Citi economist Jun Trinidad said the temporary relief from faster inflation was due to the effects of the low oil prices on energy-related consumer price index (CPI) items, as electricity, gas and cooking fuel costs eased by 5.7 percent year-on-year.

Article continues after this advertisement

He said core inflation had retreated to 1.8 percent year-on-year in January versus 2.1 percent year-on-year in December, resulting in a sequential decline of 0.15 percent month-on-month, taking out seasonality factors.

FEATURED STORIES

Core inflation excludes certain volatile food and energy items to better capture underlying price pressures.

“The oil supply glut in January, i.e. Iranian oil, could have contributed to soothing core CPI upticks,” Trinidad said.

Article continues after this advertisement

Oil-rich Iran has returned to the global oil market following the lifting of international sanctions, further weighing down crude prices.

Article continues after this advertisement

By the second half of 2016, the economist expects the country’s inflation rate to “normalize” to levels within the BSP’s inflation target range.

Article continues after this advertisement

“Updated monthly trajectory of headline and core CPI flagged an upturn past 2 percent year-on-year in the second half of 2016—a base-case path that assumes no major breach of oil prices below $30 per barrel later in the year,” Trinidad said.

Citi is forecasting a “shallow” recovery in global oil prices.

Article continues after this advertisement

It expects core CPI to encounter high base effect in February and April but as it fades, the trajectory of core inflation is seen to normalize at within the range of 2.2–2.6 percent year-on-year.

Trinidad said the expected solid uptick in core inflation coupled with fading low base effects for energy-based CPI would allow headline inflation to probe 3 percent year-on-year in the third quarter of this year.

“Amid favorable demand dynamics, headline and core CPI outlook shows normalization in second half of 2016 to within the mid-point of BSP’s annual inflation target range,” Trinidad said.

Overall, Trinidad said this relief from faster pace of inflation in January and the moderate trajectory of inflation in the second half would support an unchanged overnight interest rate and special deposit account policy rate at this week’s monetary policy meeting of the BSP.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

The BSP is targeting inflation to remain within the 2 to 4 percent range this 2016.

TAGS: Bangko Sentral ng Pilipinas, Business, economy, News

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our newsletter!

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

© Copyright 1997-2024 INQUIRER.net | All Rights Reserved

This is an information message

We use cookies to enhance your experience. By continuing, you agree to our use of cookies. Learn more here.