The central bank of Philipinas holds its current policy rate unchanged at 4.00%, as expected. The bank also kept SDA rates unchanged at 2.50% and the reserve requirement ratio unchanged at 20%. The BSP holds the bank rates despite the inflation rate mired below target, because, the lower inflation rate result of poor weather and global backdrop is temporary. It is believed that the inflation rate will raise to the targeted range in 2016-17.
The BSP believes that the CPI inflation will reach 1.4% in 2015, and it foresees 2.4% and 3.2% inflation rate for 2016 and 2017 respectively.
"We continue to expect the next policy move to be a hike, but with 2016 growth likely to show no improvement on this year (Barclays 2015: 5.5%; 2016: 5.5%), we see BSP hiking rates only in Q2 17. This expected hike is also only likely to materialise if growth has recovered sufficiently and inflation is high enough to justify an increase in interest rates", anticipates Barclays.
