The Philippine central bank will likely stand pat on interest rates at its policy meeting on Thursday (10/08), the first under its new governor, Nestor Espenilla, with inflation not a worry while economic growth stays solid this year.
Annual inflation has probably eased from a peak in April, due in part to easing fuel prices. That has led some economists to roll back their forecasts of at least two rate hikes, by 25 basis points each, from now till the end of 2018.
“The current inflation trajectory clearly puts less pressure on Bangko Sentral ng Pilipinas to act on its policy rates. The central bank is still not in a hurry to tighten its monetary policy,” said Gundy Cahyadi, economist at DBS in Singapore.
The consensus in a Reuters poll of 11 economists was for the central bank to keep its benchmark interest rate steady at 3.0 percent on Thursday. Policymakers have not moved since they raised rates by 25 basis points in September 2014.
They set the benchmark rate at 3.0 percent when the central bank moved to an interest rate corridor framework in June 2016.
As this is Espenilla’s first policy meeting, economists would likely pay close attention to the central bank’s language when it announces its policy decision.
Espenilla, who headed banking supervision before he was promoted to governor, has promised continuity in policies that have kept consumer prices in check and helped the Philippine economy thrive even in a challenging global environment.
At the central bank’s June rate review, it cut its average 2017 forecast for consumer prices to 3.1 percent from 3.4 previously, but kept its average forecast for 2018 at 3.0 percent.
Annual inflation has averaged 3.1 percent in the seven months to July, well within the central bank’s 2-4 percent target this year.
“High global oil inventories and increasing US oil production have helped to constrain world oil prices during second quarter 2017, and have contributed to lower headline CPI inflation pressures, with similar trends expected to continue in third quarter 2017,” Rajiv Biswas, Asia pacific chief economist at IHS Markit, said.
Economists from BPI and ING Bank, however, flagged upside risks to inflation this year from the possible passage of the new tax measures proposed by the government, which include higher excise taxes on fuel.
That may keep alive the chances of at least one rate hike this year, they said.