BSP seen keeping rates, RRR on hold


Posted at Jun 17 2014 06:46 AM | Updated as of Jun 17 2014 02:46 PM

MANILA - The Philippine central bank is likely to keep its policy rate steady at a record low when it meets on Thursday before starting to raise it in the second half of the year, according to a Reuters poll.

Nine of twelve analysts forecast the central bank's policy-making Monetary Board will vote to hold the overnight borrowing rate at a record low of 3.5 percent at its June 19 meeting.

Three of them saw a possible 25 basis point increase in the policy rate, which would be the first hike in three years.

Others said the central bank could afford to wait before hiking key interest rate.

Asked when the central bank would raise rates if there was no move on Thursday, seven of the nine analysts who responded said an increase was likely in the second half of the year, and two of them said they expected it would happen at policy meeting set for July 31.

The survey also found that most analysts expect the central bank to leave the reserve requirement ratio (RRR) unchanged at 20 percent, after raising it by a total two percentage points with increases in each of the last two meetings. Three analysts, however, predicted another hike in the RRR to 21 percent.

The majority also expected the short-term Special Deposit Accounts (SDA) rate to be left unchanged at 2.0 percent, though four analysts expected it to be hiked to 2.25 percent.

Some analysts said that the central bank, despite sounding hawkish recently, can afford to assess the inflation outlook further before taking fresh action, and a moderation in the country's rapid economic growth could make it more cautious.

The Philippine economy expanded 5.7 percent in the first quarter, its slowest annual growth in two years, hurt by the impact of last year's super typhoon.

Bangko Sentral ng Pilipinas Governor Amando Tetango said on June 5 that the central bank was ready to tweak policy if price pressures continue to mount and put this year's average inflation target of 3 to 5 percent at risk.

While Philippine inflation quickened in May to a two-and-a-half year high on costlier food and utilities, Tetangco has said average inflation is expected to remain within the target band.