The Bangko Sentral ng Pilipinas (BSP) may raise key interest rates by at least 75 basis points more for this year as inflation is seen hitting the upper end of the target band only by the fourth quarter.
In a webinar, Fitch Solutions, the research arm of the Fitch Group, said that the benchmark rate may settle at 6.25 percent this year as it perceives that the BSP will raise rates by a total of 75 basis points in the next policy meetings.
Fitch Solutions country risk analyst Shi Cheng Low said inflation is slower to peak than previously projected and it is expected to drop below the central bank’s upper target limit only in the fourth quarter of 2023.
“This will cause the central bank to proceed on a tightening cycle for a little while longer,” he said.
In December, inflation reached a 14-year high of 8.1 percent, with the full-year figure at 5.8 percent. The government’s target was two to four percent. In a bid to the effects of elevated inflation and stabilize the peso, the BSP raised its key policy rates by 350 basis points in 2022, with the overnight reverse repurchase rate reaching a 14-year high at 5.5 percent.
BSP Governor Felipe Medalla has previously said that a 25- or 50-basis-point rate increase is possible during the Monetary Board’s first policy meeting last February 16.
