Fed rate hike seen to prompt BSP tightening in ’22
The Bangko Sentral ng Pilipinas (BSP) is expected to raise policy rates along with those of the United States Federal Reserves, which are forecast to rise thrice in 2022 and again in 2023, according to Deutsche Bank.
In their latest Deutsche Bank Research update, the bank said the US Fed was now expected to jack up rates three months earlier than its previous forecast of September next year.
“We now see rate hikes starting earlier and coming faster than previously expected,” said Juliana Lee, the bank’s chief Asia economist.
Lee said that in the United States, the timing of the first rate hike by the Fed has been moved forward from September 2022 to June. This means that, since the start of this 2021, the forecast timing for such a hike has been moved forward by more than a year.
Considering this, Deutsche Bank has also moved forward the expected “lift off” for Asian economies.
“We have always highlighted the importance of exchange rate stability as an objective of monetary policy in this region and therefore of relative interest rates as a motive for policy rate changes—for Indonesia, Malaysia and the Philippines, in particular,” Lee said.
“Only around the middle of next year will most Asian economies have returned at least to their pre-COVID-19 levels of activity allowing central banks to begin normalizing policy settings,” she added.
Last week, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., observed that at P50.43 against the US dollar at trading’s close last Nov. 26., the peso has depreciated by P2.407 or 5 percent from P48.023 at the end of 2020.
