The local central bank is likely to hike interest rates by a total of 75 basis points this 2022, starting mid-year, as consumer price pressures escalate amid the Ukraine crisis alongside the much-anticipated upswing in US interest rates.
This is according to an economic research note issued on Friday by Ayala-led Bank of the Philippine Islands (BPI), which cited the possibility of local inflation rate again overshooting the 4-percent ceiling of the inflation-targeting Bangko Sentral ng Pilipinas (BSP) if global oil prices would remain above $100 per barrel.
“We are maintaining our full year forecast at 3.8 percent for now, but actual print could breach 4 percent if upward pressure on commodity prices doesn’t ease soon,” the research note said.
As of Friday, oil prices based on NYMEX (New York Mercantile Exchange) closed at $115.68 per barrel, while prices based on Brent stood at $118.11 per barrel.
BPI’s expected upward adjustment in the BSP’s policy rate this year will bring the official policy rate to 2.75 percent from a record-low 2 percent.
Aside from inflation risks, the US Federal Reserve’s monetary tightening is seen as another factor that could push the BSP to hike interest rates.
BPI noted that market consensus was currently expecting the Fed to sanction at least five rate hikes this year, potentially bringing its targeted funds rate to 1.25 percent.