London-based Capital Economics expects the Bangko Sentral ng Pilipinas (BSP) to hold off any interest rate cut during its last meeting on monetary policy on Thursday before going full steam ahead on easing next year.
“Inflation rose to 1.3 percent year-on-year in November from 0.8 percent in October. This marked the first rise in the headline rate since May.
Inflation is likely to rise sharply over the coming months as the high bases for food and fuel prices drop from the annual comparison,” Capital Economics said in a Dec. 6 report.“But we doubt this will worry the central bank—underlying price pressures are likely to stay subdued and headline inflation should begin to level off around the middle of the year.
The big picture is that inflation is likely to remain below the midpoint of the BSP’s 2-4 percent target for most of next year,” it added.The BSP had forecast headline inflation to average 2.9 percent in 2020, picking up from the projected 2.4 percent this year.As such, “having previously signaled its intention to leave interest rates unchanged for the rest of 2019, we are sticking with our view that the policy rate will be left unchanged at 4 percent at Thursday’s meeting,” Capital Economics said.
Capital Economics said monetary easing was expected to resume in 2020.