As was anticipated, the Philippines central bank kept its interest rates on hold on Thursday. The interest rate corridor was also kept on hold at 2.50 percent, 3 percent and 3.5 percent since the formal adoption of the IRC in June 2016.
Risks to inflation continued to stay tilted to the upside. The nation’s headline inflation expectations of the private sector continue to be in the upper half of the central bank’s 2 percent to 4 percent target range, even though the projections stayed the same at 3.4 percent for this year and 3 percent for next year.
The country’s private investment and household consumption are holding up. Government spending is strong, while exports are rebounding. This is likely to keep the BSP vigilant against the continuous rise in demand pull price pressures.
The policy overnight reverse repo rate has remained negative in real terms since February. The last time the central bank began the tightening cycle in mid-2014, the real policy rate was negative, noted ANZ in a research report.
“The combination of strong growth and rising inflation keeps our call for interest rate hikes to start in Q3 unchanged. We expect cumulative rate increases of 50bps in 2017, followed by 75bps in 2018”, added ANZ.
