The Bangko Sentral ng Pilipinas is expected to increase the key interest rate at least once more by 25 basis points to 6.5 percent this year on continuing threat of elevated inflation, BMI, a unit of Fitch Solutions, said in a report Monday.
“We expect that the BSP will hike once more at the next meeting, which is scheduled on June 22, as disinflation momentum is likely to slow in the near term. The latest consumer price data showed inflation dropping to 6.6 percent year-on-year in April from 7.6 percent in March and 8.6 percent in February,” BMI said.
The April inflation marked the lowest reading since August 2022, with food prices increasing the least in seven months. BMI said while inflation might remain on a broad downward trend through end-2023, “the pace of disinflation will likely slow.”
It said the BSP’s move of keeping the key policy rate steady on May 18 at 6.25 percent marked a pause rather than an end to the monetary tightening cycle, as inflation remained above the BSP’s targeted ceiling of 4.0 percent and expected to subside only by the fourth quarter of this year.
“We also flag growing upside risks to inflation as a result of food supply disruptions caused by adverse weather conditions. This could see the central bank hike once more to anchor inflation expectations,” BMI said.