Bangko Sentral to raise interest rates in 2013–HSBC

The Bangko Sentral ng Pilipinas will start tightening its policy stance next year to fight off inflationary pressure, Hongkong and Shanghai Banking Corp. (HSBC) said Friday.

 

This goes as well for other central Banks in the Asia Pacific, the British banking giant said.

 

“Due to the emergence of inflation pressure, we see an turnaround in policy cycle in the end of the year or in the beginning of next year,” HSBC chief economist for India and the Association of Southeast Asian Nations Leif Lybecker Eskesen said in a press conference.

 

"Monetary policy settings right now are actually supporting growth and, as we see it, will probably keep rates on hold for the rest of the year," he added.

 

Philippines inflation would likely fall within the 3 percent to 5 percent target set by the Bangko Sentral ng Pilipinas this year, but would slightly exceed next year’s target.

 

There is a need for tightening monetary policies in 2013 to harness inflation, according to the HSBC economist.

 

After keeping rates steady until the end of the year, HSBC sees the Bangko Sentral raising interest rates by 25 basis points in the first quarter of next year and by another 25 basis points in the second quarter.

 

The Philippine Monetary Board has so far reduced interest rates by 50 basis points this year on a benign inflation outlook and fragile global economic growth. This brought the overnight borrowing rate back to a record low of 4 percent and the overnight lending rate at 6 percent.

 

However, the policy-setting body decided to keep rates unchanged last April 19 to assess the impact of the earlier rate cuts on the economy.

 

It expects inflation to average 3.5 percent this year and 5.2 percent next year.

 

Eskesen said the country’s gross domestic product (GDP) growth would continue to be fuelled by strong private consumption, expanding by 4.4 percent this year and 5.2 percent next year.

 

For other central banks in the region, HSBC expects New Zealand to raise interest rates by as much as 50 basis points in the second half of the 2012, and both Korea and Thailand by 25 basis points.

 

Taiwan would also raise rates by 12.5 basis points, Eskesen noted. 

 

By 2013, New Zealand will raise interest rates by another 50 basis points, with Malaysia, Sri Lanka, and Thailand raising interest rates also by 50 basis points, according to HSBC.

 

Likewise, Indonesia is expected to raise interest rates by 75 basis points and Korea, Australia, and Taiwan by 25 basis points each.

 

However, Vietnam is expected to slash interest rates by 100 basis points and India by 25 basis points. HSBC did not explain why. —VS, GMA News