The Bangko Sentral ng Pilipinas (BSP) is expected to make no changes in its last monetary- policy meeting this year. However, 2017 will be a different picture for the country’s central monetary authority, an international economist said.
Singapore-based DBS Bank economist Gundy Cahyadi said the main policy rates of the BSP would remain unchanged this Thursday, as inflation starts to trend back to the target range in the last few months. The BSP will have its meeting on Thursday.
“Core inflation has bottomed out in the second quarter of 2016. Underlying domestic demand remains strong and inflation expectations have inched up going into 2017. Note that inflation in the housing/utilities and transport components of the CPI [consumer price index] are already back in the positive since the third quarter of 2016. This upward trend will be sustained next year, as crude-oil prices inch higher,” Cahyadi told reporters in an e-mail, citing reasons behind the forecast.
Latest data earlier this month showed the growth of consumer goods’ prices came faster than the central bank’s expectation in November, hitting its highest acceleration since December 2014.
The Philippine Statistics Authority (PSA) reported a 2.5-percent inflation print for November this year, bringing the average inflation rate of the country in the first 11 months of the year at 1.7 percent, still below the 2-percent to 4-percent target range of the government for the year.
The November inflation is the highest growth of prices in the country since December 2014 when it hit 2.7 percent. It also matched the inflation in February 2015.
Cahyadi also expects inflation to average within target in 2017 to hit 2.7 percent, which would broaden the BSP’s room to maintain rates at current levels.
The BSP Monetary Board has been maintaining policy rates since 2014, now at 3 percent for the overnight repurchase facility.
However, for 2017, Cahyadi said the BSP will likely shift to a tighter monetary-policy stance.
“Not only there is the anticipated upward pressure from global rates, but BSP is also likely to be watching the growth-inflation dynamics very closely. Indeed, given investment growth staying in the double-digits, the BSP may find the need to slow growth momentum,” Cahyadi said.