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September 26, 2022

ING Bank sees up to 75 bps rate hikes this year

ING Bank led by bankero Hans Sicat expects the Bangko Sentral ng Pilipinas (BSP) hiking interest rates by 75 basis points this year after starting its first interest rate liftoff in more than three years to curb rising inflationary pressures.

Nicholas Mapa, senior economist at the Dutch financial giant, said the central bank’s Monetary Board would remain hawkish after staying dovish for more than a year as inflation continues to heat up.

“We expect BSP to retain its hawkish stance with the central bank likely to offload up to 75 bps worth of rate hikes in 2022,” Mapa said.

The BSP raised interest rates by 25 basis points, the first time since November 2018, as the 8.3 percent gross domestic product (GDP) expansion shows that recovery was on solid footing, while inflation continues to surprise on the upside.

“Headline inflation also surprised on the upside with all indications pointing to even faster inflation in the coming months. With the recovery in hand and price pressures surging, BSP finally decided to join the rate hike club, raising its policy rate by 25 bps,” Mapa added.

According to Mapa, the market had priced in an adjustment from the central bank given recent developments.

He added that the elevated energy and food prices are likely to keep headline inflation above target for time while a recent wage hike confirms that second round effects have finally sprouted up.

“Price pressures may also have emanated from the demand side with red hot household consumption helping fan inflation further,” he said.

This prompted the Monetary Board to raise its inflation forecasts to 4.6 from 4.3 percent for 2022 and to 3.9 from 3.6 percent for 2023.

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