By Keisha B. Ta-asan, Reporter
THE BANGKO Sentral ng Pilipinas (BSP) should be cautious and “more patient” before pausing its tightening cycle as it needs to anchor inflation expectations amid lingering risks, analysts said.
This, as the US Federal Reserve delivered a 25-basis-point (bp) rate hike at its policy meeting this week, as expected by financial markets.
The US central bank has now raised borrowing costs by 500 bps since March last year, bringing the Fed fund rate to 5-5.25%.
“The BSP has always been careful in keeping a positive differential between its policy rate and the US Fed’s, given that dollar assets are considered safe haven,” former BSP Deputy Governor Diwa C. Guinigundo said in a Viber message.
The Philippine central bank has raised borrowing costs by 425 bps since May last year, bringing its key rate to 6.25%, the highest in nearly 16 years.
The Monetary Board will hold its next policy meeting on May 18.
Inflation in the Philippines is beginning to stabilize, but wage increases and supply constraints due to El Niño may result in more price pressures, Mr. Guinigundo said.
The state weather bureau this week said El Niño would likely develop in the next three months and might last until the first quarter of next year.
“The BSP might continue to be cautious, but not as cautious as before, because of the better prospects of inflation,” he said. “But it will not be good for inflation expectations to quickly abandon a cautious monetary stance precisely because of the remaining price risks.”
“BSP should be expected to be more patient in monitoring additional data before it begins to keep its policy rate and ultimately shifts to an accommodative mode,” he added.
BSP Governor Felipe M. Medalla earlier said the BSP might consider keeping benchmark interest rates on hold at it’s policy meeting this month if inflation eased further in April.
A BusinessWorld poll of 14 analysts yielded a median estimate of 7% for April in BusinessWorld
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