Philippine Central Bank keeps policy steady, in line with expectations

The Philippine central bank, Bangko Sentral ng Pilipinas (BSP) held policy rates steady, largely in line with expectations. The apex bank maintained the reverse repo rate and special deposit account at 4 pct and 2.50 pct respectively. The BSP had last, altered and adjusted its policy stance in September 2014, when it held the torch bearer for the US Federal Reserve to contract interest rates.

The central bank’s inflation outlook remains well anchored within its target range. Over the next few weeks, the transition to an interest rate corridor framework should see the central bank opening new tenors in the SDA window, ANZ reported.

"Assuming a seamless transition, we are still pencilling in a 25bps hike in the overnight RRP window at the end of Q4 2016," ANZ predicted in a research report.

Further, the central bank maintained its inflation forecasts of 2.1 pct in 2016 and 3.1 pct in 2017, keeping it well within the BSP’s inflation forecast range of 2-4 pct.

"Over the next few weeks, we expect BSP to open new tenors in the SDA window which will ultimately lead to the introduction of the Term Deposit Auction Facility," ANZ said in its recent report.

However, the research bureau further predicts that the Central Bank will hike interest rate by about 25 bps at the end of the last quarter of the fiscal year.