BSP poised to cut rates– HSBC Global Research
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Thu, 18 Apr 2019 16:15:09 +0000
The start of an easing cycle is imminent, HSBC Global Research said, forecasting cuts totaling 50 basis points (bps) this year for the Bangko Sentral ng Pilipinas’s (BSP) benchmark rates.
“Taken together with the large amount of ‘policy space’ created by rate hikes last year (above all in the Philippines and Indonesia), it is increasingly clear that parts of the region are on the cusp of an easing cycle,” the research unit said in a report released earlier this week.
Above-target inflation prompted the Bangko Sentral ng Pilipinas’ (BSP) policymaking Monetary Board to hike key interest rates five consecutive times last year, only pausing after consumer price growth began easing in November.
A third pause resulted from the last policy meeting on March 21, with monetary authorities noting the need for more data.
“That said, we expect the BSP to remain focused on inflation, and to ease policy only as inflation approaches the mid-point of the inflation target,” the report states.
March’s 3.3-percent inflation — a 15-month low — placed the year-to-date average at 3.8 percent, within the central bank’s 2.0-4.0 percent target.
“We expect the BSP to deliver 50bp of rate hikes, with a 25bp cut in 2Q (second quarter) and 4Q (fourth quarter),” HSBC Global Research said.
It cautioned, however, that the BSP would have to be mindful of renewed food inflation risks due to El Niño even if inflation had returned to target.
The Trade department has warned of higher prices of agricultural commodities due to droughts and dry spells brought by the weather phenomenon.
Latest Agriculture department estimates put farm sector damage caused by El Niño at P5.05 billion as of April 2.
The drought has so far hit 164,672 farmers nationwide. Damage to rice crops was estimated to have hit P2.69 billion with 125,590 metric tons lost in 37 provinces.
Affected regions include the Cordillera Administrative Region, Ilocos Region, Cagayan Valley, Central Luzon, Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon), Mimaropa (Mindoro, Marinduque, Romblon and Palawan), Western Visayas, Eastern Visayas, Zamboanga Peninsula, Northern Mindanao, Davao, Socsksargen, and the Bangsamoro Autonomous Region in Muslim Mindanao.
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