MANILA –– The Bangko Sentral ng Pilipinas may raise the benchmark interest rate to 5.50 percent after the 75-basis point hike last week due to persistent inflation, Fitch Solutions said on Monday.

The BSP on Nov. 17 raised the overnight borrowing rate to 5 percent to match the US Federal Reserve's 75-bps hike on Nov. 2. The recent hike is also meant to cool down inflation, which hit a nearly 14-year high of 7.7 percent in October.

"With inflation set to induce further hikes over the coming months, we now forecast interest rates to rise to 5.50 by end-2022," Fitch Solutions said in a statement.

"We think that a stabilization in global monetary conditions and headwinds to economic growth are likely to cause the pace of hikes to slow. As such, we expect the BSP will deliver a smaller 50 bps hike at its final meeting of the year in December, before raising rates further to a peak of 5.75 percent in the first half of 2023," Fitch Solutions said.

National Statistician Dennis Mapa earlier said the recent typhoons that affected crops could push supply-side inflation upwards in the coming months.

Inflation is seen to remain above the 2 to 4 percent target range this year and the next at 5.8 and 4.3 percent, before easing back within target by 2024 at 3.1 percent, the BSP earlier said.

Fitch Solutions said it expects inflation to hit 5.8 percent in 2022, in line with the BSP's forecast, but higher at 4.8 percent in 2023.

• Inflation quickens further to 7.7 percent in October, highest in nearly 14 years
• Bangko Sentral hikes benchmark interest rate by 75-bps to match Fed, fight inflation

Higher interest rates, inflation and weaker external demand could lead to a slower economic growth from 7.4 percent in 2022 to 5.9 percent in 2023, Fitch Solutions said.

The Philippine gross domestic product (GDP) expanded by 7.6 percent in the third quarter and is on track to meet the government target of 6.5 to 7.5 percent for the year.

• Philippine economy grows 7.6 percent in third quarter, on track for full-year target

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