Connect with us

Hi, what are you looking for?

News

BSP may raise rates by 50 bps next week

BW FILE PHOTO

THE UNITED STATES Federal Reserve’s aggressive tightening will put more pressure on the Bangko Sentral ng Pilipinas (BSP) to consider a bigger rate hike at its meeting next week.

The Federal Reserve on Wednesday raised interest rates by 75 basis points (bps), the largest hike since 1994, to curb soaring inflation. Fed Chair Jerome H. Powell also signaled a steep increase in their next meeting.

“Such a more substantial monetary tightening by the US Fed could affect the BSP’s announced stance of gradual normalization of monetary policy,” former BSP Deputy Governor Diwa C. Guinigundo said in a Viber message on Thursday.

The BSP is poised to raise its key interest rate at its next two meetings to address inflation, incoming BSP Governor Felipe M. Medalla said during a virtual roundtable discussion with BusinessWorld editors on Tuesday.

However, Mr. Medalla, a current Monetary Board (MB) member, signaled that the pace of subsequent tightening will be gradual as he ruled out hikes higher than 25 bps.

“While it’s true that signaling such contractionary stance should provide some forward guidance on the BSP’s policy intent and therefore inflation expectation, the size of the Fed’s adjustment could somehow enlarge the expectation by the market of the BSP’s future move,” Mr. Guinigundo said.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said higher Fed rates may lead to further upward adjustments in the local policy rate from the current 2.25%.

“Thus, there is a chance of a local policy rate hike of +0.50 on the next rate-setting meeting on June 23, 2022 and more local policy rate hikes for the rest of the year, partly to maintain a comfortable interest rate differential with the US, to account for the comfortable spreads/interest rate differentials/risk premium — a dilemma faced by many other countries/central banks around the world,” Mr. Ricafort said in a note.

Bank of the Philippine Islands (BPI) in a press release said it now anticipates a 50-bp hike at the next MB meeting.

“We now expect a 50-bp hike from the BSP at its June meeting given the latest move of the Fed. Hiking the policy rate gradually in contrast to what the Fed is doing may exacerbate the headwinds affecting the Philippine economy,” BPI said.

“A very narrow gap between US and local interest rates will likely exert more pressure on the peso, which will eventually translate to more inflation.”

The peso weakened by 3.5 centavos on Thursday as it closed at P53.47 versus the dollar from its P53.435 finish on Wednesday

Incoming Socioeconomic Secretary Arsenio M. Balisacan said the country has to adjust to global policy tightening, and be more mindful of any shocks.

“If interest rates are rising outside of our country, we have to adjust to that because if you don’t, capital will move out of the country,” he said during a roundtable with BusinessWorld editors on Thursday.

“I think we don’t think macroeconomic fundamentals are that bad compared to other countries. We can withstand these shocks. We have to be mindful, always alert, adjusting to the shocks. Failure to do so will be damaging to the economy.”

MORE SELLING?Meanwhile, the benchmark Philippine Stock Exchange index (PSEi) rose by 73.59 points or 1.16% to close at 6,393.01 on Thursday, recovering from Wednesday’s bloodbath.

Philippine Stock Exchange, Inc. President and Chief Executive Officer Ramon S. Monzon told ANC that the Wednesday’s drop was “in anticipation of what kind of rates the Fed will impose.”

“We’ve been in worse situations and we’ve bounce back to a higher level. I have no doubts what is happening is temporary,” he said.

In a Viber message, AAA Southeast Equities, Inc. President William M. Cabangon said the Fed’s tightening cycle is pulling down global markets, including the PSE.

“I expect selling to continue over the next few months as valuations continue to readjust lower in line with rising interest rates. Although stocks are cheap relative to past earnings, the uncertainty over future earnings due to inflation and slowdown concerns do not make forward-looking valuations very attractive,” Mr. Cabangon said. — with reports from Keisha B. Ta-asan and Luisa Maria Jacinta C. Jocson

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

News

The Filipino spirit of giving remains in full force as people prepare for Typhoon Karding which is moving towards the Philippine Area of Responsibility....

Editor’s Pick

Immigration rules are set to be loosened as part of Liz Truss’s mission to boost growth. The Prime Minister is expected to expand the...

News

REUTERS KYIV — The United States warned on Sunday of “catastrophic consequences” if Moscow uses nuclear weapons in Ukraine, after Russia’s foreign minister said...

News

South Korean President Yoon Suk-yeol. — REUTERS SEOUL — South Korean President Yoon Suk-yeol said on Monday “untrue” media reports over his remarks threatened...

News

STOCK PHOTO Image by Stefan Schweihofer from Pixabay TOKYO — The British pound tumbled nearly 5% to an all-time low on Monday as investors...

News

Follow us on Spotify BusinessWorld B-Side Nuclear energy has a bad reputation in the Philippines. That the Bataan Nuclear Power Plant is unfit and unsafe...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.