Philippine central bank seen hiking key rate by another 50 bps on Thursday: poll

Enrico Dela Cruz, Reuters

Posted at Sep 25 2018 01:30 PM

Bangko Sentral ng Pilipinas. Mark Demayo, ABS-CBN News

MANILA - The Philippine central bank is widely expected to raise its key interest rate by another 50 basis points on Thursday, in a strong follow-through move to curb inflation and shore up the shaky peso currency, a Reuters' poll showed.

All but one of 15 analysts surveyed expect the Bangko Sentral ng Pilipinas (BSP) to raise the reverse repo rate to 4.50 percent. One predicted a hike of "at least" 25 basis points (bps).

The central bank has raised interest rates by 100 bps since May, including 50 bps on Aug. 9, in a bid to tamp down inflationary pressures, which have been steadily rising since January due to higher taxes, a weak peso, and rising food and fuel costs. 

In August, inflation surged to a more than 9-year high of 6.4 percent, way above the central bank's 2-to-4 percent comfort range, prompting policymakers to say they will take "strong immediate action" to manage the pace of price increases. 

Some analysts see no immediate respite from fast inflation with global oil prices on the rise and crop losses after the region was hit by a powerful typhoon, leading them to believe Thursday's anticipated rate hike would not be the last for the year. 

"Inflation risks appear front and center on the policy radar," Barclays said in a note, adding the central bank would likely keep its hawkish rhetoric.

"The continued upside risks to inflation beyond 3Q mean that there is greater likelihood of further monetary tightening in the next six months," HSBC economist Noelan Arbis said.

An aggressive rate hike should also shore up the peso, which has slumped nearly 8 percent against the US dollar so far this year to its weakest level in more than 12 years.

But it may not give the peso much chance to rebound, as the US Federal Reserve is expected to raise rates hours earlier, supporting the dollar.