Nomura: MB likely to order 50-bps hike
Monetary authorities could ramp up an expected policy rate next week with inflation likely to remain well above target, Japan’s Nomura said on Thursday.
“We now expect a 50-bps (basis point) policy rate hike at BSP’s (Bangko Sentral ng Pilipinas) next Monetary Board meeting on 9 August, from 25 bps earlier, which would take the policy rate to 4 percent,” it noted in a report.
Nomura explained that its forecast was in line with BSP Governor Nestor Espenilla Jr.’s statement last month that the central bank was considering “strong follow-through monetary adjustment” at the next meeting of its policy-making body.
“Importantly, we expect the policy statement to remain hawkish, with BSP clearly leaving the door open for further hikes,” it added.
The Monetary Board, which will hold its fifth meeting for the year next week, raised key interest rates in May and
June to address above-target inflation.
The consecutive 25-basis point adjustments brought the Bangko Sentral’s overnight borrowing, lending and deposit rates to 3.5 percent, 4.0 percent and 3.0 percent, respectively.
Moreover, Nomura pointed out that the central bank’s hawkish rhetoric had stepped up in recent weeks and that data to be released ahead of the meeting should support more aggressive policy action.
In particular, it said inflation likely jumped to 5.6 percent in July — within the BSP’s 5.1-5.8 percent forecast range.
Official inflation data for July will be announced on August 7 and the results will be considered when the Monetary Board meets two days later.
Consumer price growth has topped the BSP’s target since March and economic managers have raised their forecast for the year to 4.0-4.5 percent from 2.0-4.0 percent.
The central bank expects consumer price growth to peak in the third quarter, with the full-year average breaching its target, before returning to the 2.0-4.0 percent target in 2019.
During its last policy meeting, the Monetary Board trimmed its inflation forecasts for 2018 and 2019 to 4.5 percent and 3.3 percent, respectively, from 4.6 percent and 3.4 percent previously.
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