Philippines to opt for another 50 basis point rate hike on Thursday

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  • 13 out of 21 economists see the key rate rising to 4.25% this week
  • BSP will announce its tariff decision on Thursday, September 22

BENGALURU, Sept 20 (Reuters) – The Philippine central bank is likely to opt for a half-point interest rate hike on Thursday to support the weakening currency and lessen its effect on imported inflation, a poll shows Reuters from economists.

Down more than 11% on the year, the Philippine peso is one of Asia’s worst performing currencies. Its poor performance against the US dollar, supported by an aggressive Federal Reserve set to register another 75 basis point hike on Wednesday, has led to a record trade deficit and higher inflation.

To support the currency and control inflation, the Bangko Sentral ng Pilipinas (BSP) has already raised its key rate (PHCBIR=ECI) by 175 basis points since May.

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More than 60% of the majority of economists polled, or 13 out of 21, expected a 50 basis point hike to 4.25% at its Sept. 22 meeting, compared with half of economists who forecast 4.00 % in the previous survey. If that were to happen, it would push the borrowing rate to the highest since August 2019. read more

Six now expected a quarter-point rise to 4.00%, one predicted a jumbo 75 basis points to 4.50%, and only one vote in the September 13-19 poll did not. expected no movement from the BSP.

“Aggressive US Fed action at a time when the Philippines’ (balance of payments) is under pressure continues to put pressure on PHP,” noted Debalika Sarkar, an economist at ANZ, referring to the peso currency.

“It is therefore conceivable that rate hikes will need to be more aggressive to minimize currency volatility and the pass-through to domestic prices.”

More than 75%, or 13 out of 17, expect the interest rate to be 4.50% or higher by the end of the year – also the expected peak of this cycle – 50 basis points higher than in the previous poll. Eight said 4.50% and four said 4.75%. The other four said 4.25% or less.

Although inflation fell to 6.3% in August from a four-year high of 6.4% in July, analysts said it had yet to peak, leaving room to further rate hikes. The central bank is targeting inflation of 2-4%.

“A forceful approach by the BSP to bring forward future rate hikes to the September meeting would not only reduce upside inflation risks, but also cement the central bank’s credibility and commitment to bringing inflation back. to its goal,” noted Han Teng Chua, an economist at DBS. Bank.

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Reporting by Shaloo Shrivastava; survey by Anant Chandak and Devayani Sathyan; Editing by Hari Kishan, Ross Finley

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