The current Deputy Governor of the Banko Sentral ng Pilipinas (BSP), Nestor Espenilla Jr., was appointed as the central bank’s next governor today. The market is expected to see the appointment of a central bank insider to a six-year term as a positive news. Under Espenilla, the policy is expected to continue. With core inflation in the Philippines still accelerating, the trade deficit is worsening. One of Espenilla’s decisions early in his tenure would be to raise interest rates, noted ANZ in a research report.
Espenilla will become the new BSP governor effective 2 July 2017, taking over from Amando Tetangco. The central bank is expected to continue with its ongoing monetary policy decision making with a firm focus on inflation. With core inflation continuing to accelerate in Philippines and within the middle of the target bank, the central bank might get closer to hiking the rates.
The nation’s economic growth continues to be strong that is leading to rising imports, resulting in a deterioration in the trade deficit. Moreover, inflation expectations might continue rising due to the upcoming tax reforms.
“We forecast 50bps of rate hikes this year (25bps in Q3 and 25bps in Q4)”, added ANZ.
