Economist sees Bangko Sentral hike interest rates in second half

A private banking economist said on Friday that the Bangko Sentral ng Pilipinas is expected to start raising the overnight borrowing rate by 2% by the second half of this year, as some countries react to further rate hikes. rate by the US Federal Reserve.

Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said in an online briefing the “widely expected Fed rate hike of +0.25 on March 16, 2022, which will be followed by my Fed more numerous and earlier thereafter”. [or six more +0.25 Fed rate hikes for the rest of 2022]; and [3-4 +0.25 Fed rate hikes for 2023].”

“Based on dot plot/Fed estimates; A possible Fed decision on shrinking the Fed’s balance sheet by May 2022 could lead to upward adjustments in policy rates from record lows near zero percent in other countries, particularly in other countries. other developed countries,” said Ricafort.

He said these rate adjustments in other countries should maintain healthy interest rate differentials and effectively respond to and better manage relatively higher recent inflation and inflation expectations amid an improving outlook. of global economic recovery.

“So it is a difficult and delicate balancing act in managing monetary policy, going forward, to prevent inflation from continuing to soar,” he said.

Asked by many if the BSP might raise interest rates this year, Ricafort said it would be “less than the Fed; local policy rate hike of at least 0.50-0.75 [less vs. the Fed’s expected total hike of 1.50-1.75]depending on the second-round effects on inflation of proposals for wage increases and requests for higher transport fares, both of which could lead to higher prices for other affected products and services.

Inflation in the first two months of 2022 averaged 3%, the midpoint of the 2% to 4% target range for the year.

BSP Governor Benjamin Diokno said on Thursday that the Philippines would act independently of the US Federal Reserve, which raised interest rates for the first time since 2018.

Diokno said the country’s macroeconomic fundamentals remained strong despite the global pandemic and the geopolitical crisis in Eastern Europe.

He said any policy decision by the Monetary Board would remain based on data, such as the latest inflation and domestic production figures, to avoid “unintended consequences”.

“We don’t need to keep pace with the Fed…but we will review our inflation outlook at our next policy meeting,” Diokno said.

Stephen V. Lee