Analysts see no shift in Bangko Sentral policy stance

Philippine authorities are keeping the current policy settings unchanged when the Monetary Board meets on Thursday, February 12, as commodities pose no pressures on prices, according to analysts polled  by GMA News Online.

 

All seven private sectors analysts expect policy rates – the benchmark for bank lending – to stay at 4 percent for overnight borrowing and 6 percent for overnight lending.  

 

The view is supported by the recent inflation data, said Remrick Patagan, Institute for Development and Econometric Analysis (IDEA) Inc. research director.

 

"The headline inflation rate has slowed, primarily due to falling international fuel prices. The consensus outlook for oil prices remains weak, at least until the first half of the year," he said.

 

Inflation slowed down to 2.4 percent in January, a 17-month low, compared with 2.7 percent in December 2014 and 4.2 percent a year earlier as oil, transport and utilities prices went down, according to the Philippine Statistics Authority (PSA).

 

On the heels of the inflation data, the Bangko Sentral ng Pilipinas (BSP) hinted that its policy-setting board has no real reason to adjust policy rates, Metropolitan Bank & Trust Co. research head Ildemarc Bautista said. 

 

"We see them holding rates as they will look at available data first," he said.



'Some room'

 

On January 30, BSP Governor Amando Tetangco Jr. said easing inflationary pressures due to the decline in international oil prices and a strong economic growth momentum give the central bank "some room to maintain policy stance."

 

Policy rates were last raised in September 2014 to rein in inflationary risks.

 

Given that inflation is within the target for the year, Bank of the Philippine Islands lead economist Emilio Neri Jr. said there's low probability that the central bank will adjust rates in the near-term.

 

"We are still very far from breaching the low-end of the 2 to 4 percent target," he noted.

 

Moving forward, however, inflation is seen to steady above 2 percent as the base effect is starting to wane.

 

"In the early part of last year, we were still reeling from Yolanda and supply bottlenecks due to typhoons. But the base effect is diminishing, so we expect there will be no sharp decline in inflation," Neri noted.

Oil prices, US rates

 

The BSP is keeping an eye on oil prices in global markets and the potential move of the Federal Reserve to raise US interest rates, said Trinh Nguyen, economist at Hongkong and Shanghai Banking Corporation Limited.

 

"As a net importer of food and oil, the Philippines is susceptible to external movements of prices (for better or for worse)," the Hong Kong-based economist said.

 

"The Fed potentially raising rates in second half of 2015 is another concern," she added.

 

In its last meeting, the US central bank announced it would be patient in deciding when to raise the benchmark borrowing rate from zero later this year. 

 

The rate has been in place since 2008 when the US economy was officially declared as having entered recession.

 

With that in mind, the BSP is expected to "remain on hold" until the US Fed starts tightening its policy, ING Bank Manila senior economist Joey Cuyegkeng said.

 

"Guarding against volatility that could result from spikes in commodity prices or normalization of US monetary policy remains the current concern of BSP," he said. – VS, GMA News