Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. was seen keeping a steady hand over the monetary levers and keep the rate at which the BSP borrows from or lends to banks steady, as he completes a 12-year stint that allowed the $292-billion economy to prosper throughout the period.
Tetangco, a multiawarded central banker recognized by some of the most influential institutions here and abroad, helped steer the economy with local output of only $103.1 billion when he started.
Latest readings indicate against a change in monetary-policy settings no matter that commodity and services prices have steadily risen in recent months, sparking apprehension over probable monetary-policy adjustments.
ING Bank senior economist Joey Cuyegkeng ruled out a policy adjustment earlier than August this year.
“The gradual increase of inflation argues for a steady monetary-policy expectation until the first monetary-policy setting meeting presided over by the new central bank governor in August,” Cuyegkeng said.
The BSP has kept its borrowing rate at 3 percent, unchanged from when the Monetary Board met in March. The seven-man Monetary Board Tetangco chairs will next meet on May 11, representing his penultimate rate-setting meeting as BSP governor.
Earlier this month, Tetangco said inflation would likely average from 3 percent to 3.8 percent in April, or near the upper end of the target of 2 percent to 4 percent.
The elevated expectation, according to Tetangco, was traced to higher prices of fuel, electricity and water during the period.
The Philippine Statistics Authority (PSA) is scheduled to report the April price numbers on Friday, May 5.
“Market also continued to expect that inflation average for this year and next year would be within the 2-percent to 4-percent inflation target range even though the average would be nearer the upper end of the target range,” Cuyegkeng said of the projected path inflation for the month will take.
“Markets have seemed to price in such an inflation path for this year. The risk to the forecasts come from oil prices with some foreign analysts calling for $60 to $65 per barrel of crude oil in 2018, easily a 20-percent increase on top of the almost 25-percent increase this year.”
Cuyegkeng also said the timing and extent of tax adjustments on petroleum products could affect expectations, while power and water rates adjustments remain an overhang.
Those seen taking the helm of the BSP when Tetangco finally exits in July include EastWest Bank President Antonio Moncupa who has been endorsed by Senate President Aquilino L. Pimentel III; BSP Deputy Governor Nestor A. Espenilla Jr., current head of the supervision and examination sector; BSP Deputy Governor Diwa C. Guinigundo—who heads the monetary stability sector; and Peter Favila, a former Monetary Board member.
Tetangco expressed a preference for the next BSP governor to have come from the inside and with extensive central banking background he considers crucial to getting the work done.