Moody’s Analytics forecasts 75 bps hike in BSP rates this week

Moody’s Analytics forecasts a 75 basis points jump in the Bangko Sentral ng Pilipinas (BSP) key rates this Thursday, in line with the earlier statement by BSP Governor Felipe Medalla.
“Bangko Sentral ng Pilipinas is expected to raise the overnight borrowing rate by 75 basis points to 5 percent,” it said in its Asia Pacific economic preview for the week covering Nov. 14-18.
The BSP’s policy-making Monetary Board (MB) will have its second to the last rate setting meeting for this year on Thursday.

It already hiked the central bank’s key policy rates by 225 basis points since last May in a bid to help tame the soaring domestic inflation rate and help tame the peso’s weakness against the United States dollar.

The rate of price increases further accelerated to 7.7 percent last October, the highest since December 2008, because of continued upticks in the prices of oil and non-oil commodities in the international market which is partly due to the ongoing conflict between Russia and Ukraine.

The average inflation rate in the first 10 months this year stood at 5.4 percent, way above the government’s 2-4 percent target band.

Monetary authorities have stressed the need to hike the central bank’s key rates to help address the rising inflation rate since it has already resulted to second round effects, such as increase in minimum public utility fare and wages.

They said the impact of the rate hikes are expected to the cushioned by the continued recovery of the domestic economy, which further expanded by 7.6 percent in the third quarter of this year.

The rising inflation rate has affected monetary policies around the world.

For one, the US’ Federal Reserve earlier this month delivered another 75 basis points increase in its key rates, which has affected currencies, such as the Philippine peso.

Following the latest Fed rate hike announcement, BSP Governor Felipe Medalla said the BSP will also increase its key rates by the same level to ensure adequate interest rate differential with the US.

The local currency started the week’s trading at 57.3 but it already closed to its weakest of 59.00 to a dollar several times last October given the strengthening of the greenback due largely to the Fed rate hikes.

Its current trading level is a deprecation after ending 2021 at 50.999.

Medalla said the BSP rate hikes are needed to ensure price stability in the country, which is among the BSP’s mandate. (PNA)

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