Slower inflation to keep PHL monetary policy unchanged in 2013 — Barclays

Philippine consumer prices are expected to move at a benign pace, allowing monetary authorities to keep policy rates at record lows the rest of 2013, British investment banking giant Barclays noted. 

 

“Given contained commodity prices, we are revising down our 2013 inflation forecast,” Prakriti Sofat, economist at Barclays in Singapore, said in a research note e-mailed Thursday night. 

 

Barclays now forecasts inflation to settle at 3 percent in 2013 and 3.6 percent in 2014, both within the central bank's 3 to 5 percent inflation target. 

 

In a telephone interview with GMA News Online Friday, Sofat said slower inflation will keep monetary authorities from adjusting policy. 

 

“No change in policy rates for now. But our base case is an additional 50 basis points cut in SDA rates in the coming six months,” she noted. 

 

“We believe the Philippines macro fundamentals are solid—robust growth, healthy balance of payments, improving ratings trajectory and a reform-oriented government,” Sofat said. 

 

Inflation in May was unchanged at 2.6 percent, pulling the year-to-date average to 3 percent. 

 

Benign inflation figures allowed monetary authorities to keep policy rates unchanged. 

 

The central bank left policy rates—the benchmark for bank loans—untouched at 3.5 percent for overnight borrowing and 5.5 percent for overnight lending. 

 

Bangko Sentral ng Pilipinas on Thursday cut its 2013 inflation forecast to 3.1 percent from 3.2 percent in April on expectations of a continued slack in global demand. 

 

The central bank, however, raised in 2014 inflation forecast to 3.6 percent from 3.4 percent earlier citing liquidity may finding its way into the market and stoke consumer prices. 

 

The central bank also kept yield on special deposit accounts (SDA)—a tool to manage liquidity by either moping up or releasing liquidity through rate adjustments. 

 

Last week, Barclays raised its Philippine economic forecast to 6.8 percent, near the upper end of government's 6 to 7 percent growth goal and unchanged from last year's revised forecast. — VS, GMA News