HSBC sees BSP raising interest rates by 75 basis points in H1

The Bangko Sentral ng Pilipinas is widely expected to deliver a 75 basis point rate hike within the first half of the year to ramp up the fight against inflation, according to HSBC.

In a virtual briefing on Wednesday, HSBC economist for the Association of Southeast Asian Nations (ASEAN) Aris Dacanay said food inflation continues to drive the rate of price increases but core inflation, which excludes volatile food and oil items, accelerated by 6.9 percent year-on-year last December, thus the expectations of additional hikes in the central bank’s key rates.

“We think BSP will hike rates by 25 basis points in each of the next three meetings of the Monetary Board,” he said.

The MB’s first three meetings this year have been scheduled for Feb. 16, March 23 and May 18.

Last year, the Board hiked the BSP’s key rates by a total of 350 basis points to help address the elevated inflation rate and ensure interest rate differential with the US.

This, as inflation was on the uptrend and breached the government’s 2 to 4 percent target band in April 2022 when it accelerated to 4.9 percent.

Dacanay said risks to inflation remain high due partly to supply constraints on several food items. (PNA)