HSBC: Bangko Sentral to put SDA, policy rates on hold

British banking giant HongKong Shanghai Banking Corporation Limited expects Philippine authorities to refrain from tweaking monetary policy next week as as they observe how previous actions are impacting on the system. 

 

“The acceleration of inflation in February will likely motivate the central bank to keep main policy rates as well as the SDA rates on hold,” said Trinh Nguyen, Hong Kong-based HSBC economist, in an e-mailed research note. 

 

“Given that economic data is robust and the risk to inflation tilts to the upside due to still-high demand, the BSP (Bangko Sentral ng Pilipinas) can gain more from being vigilant before taking steps to save on sterilization costs,” she added. 

 

In January, monetary authorities rationalized SDA rates—previously priced at a premium to policy rates—to 3 percent. http://www.gmanetwork.com/news/story/291849/economy/business/bangko-sentral-keeps-interest-rates-unchanged

 

The Bangko Sentral then opted to keep record low policy rates on hold at 3.5 percent for overnight borrowing and 5.5 percent overnight lending. 

 

Monetary authorities will meet on Thursday, March 14, to discuss policy. A subsequent meeting will be held on April 25. 

 

Bangko Sentral Governor Amando Tetangco Jr. earlier noted there is room for a further cut on SDA rate—that such action cannot be ruled out.  

 

But Nguyen said, “While we think that the BSP could reduce the SDA rate further, it is unlikely to take any action at the next meeting to monitor how prices behave in March.”

 

On Tuesday, the National Statics Office reported headline inflation quickened to its fastest in five months at 3.4 percent last February from 3 percent in January. 

 

The figure remains well-within the Bangko Sentral projection of 2.8 percent to 3.7 percent for February. It pushed the year-to-date average to 3.2 percent—still at the lower end of central bank's 3 to 5 percent target. — VS, GMA News