Poll: Analysts split on BSP rate hike after weak Q3 growth

Reuters

Posted at Nov 13 2018 01:16 PM

MANILA - Analysts were nearly evenly split on whether the Philippine central bank will raise interest rates on Nov. 15 to tackle stubbornly high inflation after the economy grew at its slowest annual pace in more than 3 years in the third quarter.

Seven out of 13 economists in a Reuters poll expect the Bangko Sentral ng Pilipinas to hike its policy rate by 25 basis points to 4.75 percent, while the other 6 expect it to pause after raising rates by a total 150 basis points since May.

"A degree of prudence is required before the BSP tightens monetary policy settings further," said HSBC economist Noelan Arbis, who is calling for a pause in rate hikes.

The Philippine economy expanded 6.1 percent in the July-September period, weaker than the previous quarter's 6.2 percent growth, as higher borrowing costs and soaring consumer prices dampened domestic demand.

Socioeconomic Planning Secretary Ernesto Pernia said on Thursday the slower-than-expected growth in the third quarter would make it harder for the Philippines to meet its downwardly revised growth target of 6.5-6.9 for 2018. 

Analysts arguing for a quarter-point rate increase next week said a fifth hike this year was necessary to head off second-round effects, as surging prices have already translated into higher wages and transport fares. 

Standard Chartered economist Chidu Narayanan forecast inflation to quicken to 7.4 in December. Annual inflation steadied 6.7 percent in October, the highest rate in almost a decade.

Philippine policymakers said non-monetary measures, such as removing import restrictions on certain food items including rice, should help temper price pressures and bring inflation back to within the 2-4 percent target band in 2019.

Higher infrastructure spending and an expected increase in consumer spending in the run up to the holiday season should underpin economic growth in the fourth quarter, they said.