Moody’s Analytics, a unit of Moody’s Corp., said Monday it expects the Bangko Sentral ng Pilipinas to raise the policy interest rate by another 50 basis points to 6 percent on Thursday to rein in inflation that hit a 14-year high of 8.7 percent in January 2023.
“Bangko Sentral ng Pilipinas will be aggressive in tackling inflation early in 2023. We look for the policy rate to increase by 50 basis points to 6 percent. This will bring cumulative rate hikes since the tightening cycle began in June 2022 to 335 basis points,” Moody’s Analytics said in a report.
It said odds are high that the monetary policy tightening cycle would run longer in the Philippines than elsewhere in Asia given the stubbornly elevated inflation in the country.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., earlier said the BSP could match any future policy rate hikes by the US Federal Reserve beyond this week’s meeting to support the peso and contain inflation.
Ricafort said in a report he was expecting the BSP to increase the policy interest rate by at least 25 basis points to 5.75 percent this week.
“The markets are anticipating the next local policy rate-setting meeting on Feb. 16, 2023, when local policy rates are expected to go up by at least +0.25 [from the current 5.50 percent], matching the +0.25 latest Fed rate hike on Feb. 1, 2023,” Ricafort said.
Ricafort said the BSP “could also still match any future Fed rate hikes after recent Fed signals of about two more hikes on the next Fed/FOMC rate-setting meetings on March 22 and May 2, 2023.”
He said one of the recent policy signals relevant for 2023 was the earlier statement of President Ferdinand Marcos Jr. that the government might have to defend the peso in the coming months and use interest rates to mitigate inflation.
The peso breached the 53-per-dollar level on Feb. 2, 2023, the first time since June 2022, as it recovered from an all-time low of 59.0 in October. It closed at 54.76 against the greenback Monday.
The Fed raised its benchmark interest rate by a quarter percentage point earlier, and even hinted at possible increases going forward.
Economists from the First Metro Investment Corp. and University of Asia & the Pacific said in their latest joint report the Fed “will continue to raise policy rates, by at least 75 basis points in 2023, to bring inflation back to its target 2 percent in the light of unrelenting job creation in the U.S. economy.”
“This should constitute another upward pressure on the US dollar-Philippine peso rate,” they said.
The peso depreciated by 9.3 percent against the dollar in 2022. First Metro forecast that the peso would trade within a range of 57 to 59 against the dollar this year.