The Bangko Sentral ng Pilipinas (BSP) is expected to continue raising its benchmark rate to a peak of 6.5 percent by the end of the first half of the year in a bid to rein in accelerating inflation, according to Fitch Solutions.
“Beyond that, however, a stabilization in global monetary conditions and headwinds to economic growth will give the BSP enough reason to leave rates on hold throughout the remainder of 2023,” said the research and analytics company.
Just last week, the BSP raised its key policy rate by 50 basis points, bringing its benchmark rate to 6 percent. It also hiked its inflation projection to 6.1 percent.
Fitch Solution’s findings jibe with the prediction of Tokyo-based global financial services firm Nomura Holdings that the Philippines’ central bank would push out the timing of rate cuts to the first quarter of next year, citing the BSP’s heightened concerns over the inflation outlook.
T-bill auction
“This implies, in our view, that the BSP will look to ensure inflation has become further entrenched within its 2- to 4- percent target, and so it will take longer to unwind some of its policy rate hikes,” Nomura said.
The impact of the most recent rate increase was reflected in Monday’s auction of Treasury bills, where the government raised P13.5 billion out of the planned P15 billion at higher rates.
On Monday, the Bureau of the Treasury (BTR) made a partial award of the government’s 91-day and 182-day debt paper, raising P3.55 billion and P4.5 billion, respectively, while raising the full P5 billion from the 364-day T-bills.
The latest auction saw rates capped at 4.413 percent, 5.060 percent, and 5.455 percent, respectively.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., told the Inquirer that the auction yields posted a bigger week-on-week increase after the latest rate hike by the BSP.
Last week, the rates for the debt paper were capped at 4.230 percent, 4.949 percent, and 5.298 percent, respectively.
Ricafort said rates also rose due to the recent signals that the BSP will hike the policy rate two more times this year.