Moody’s expects 50bps hike in BSP rates

MANILA, PHILIPPINES — The continuous acceleration of the country’s inflation rates is expected to impact the central bank Bangko Sentral ng Pilipinas’ (BSP) key rates this week. 

Risk management and credit rating firm Moody’s that they are looking at a 50 basis point (BPS) increase.

“Bangko Sentral ng Pilipinas will increase the policy rate by 50 basis points to 6 percent in February as it tries to tackle still elevated headline and underlying inflation,” Moody’s said. 

BSP’s policy-making arm Monetary Board (MB) is set to have its rate setting meeting mid-February. It is slated to announce yet another rate increase. 

Just last week, the Philippine Statistics Authority (PSA) reported that in January, the pace of commodity prices’ increase reached a 14-year high at 8.7 per cent. 

Moody’s Analytics said the central bank “will be aggressive in tackling inflation early in 2023.”

Its projected rate hike will bring the central bank’s overnight reverse repurchase (RRP) rate to 6 percent, a big jump after BSP cut it to record-low of 2 percent in 2020, to help cushion the impact of the pandemic on the economy.

“Odds are high that the monetary policy tightening cycle will run for longer in the Philippines than elsewhere in Asia given stubbornly elevated inflation,” Moody’s Analytics added.