Market braces for more BSP rate hikes of up to 175bps

Indonesia Berita Berita

Market braces for more BSP rate hikes of up to 175bps
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Investment banks and economic think tanks are betting on more interest rate hikes by the Bangko Sentral ng Pilipinas this year and possibly spilling over to next year as the Philippines balances economic recovery and high inflation. | bendeveraINQ /PDI

HSBC Asean economist Aris Dacanay projected “another 25-bp hike in the June 23 Monetary Board meeting, and another 50-bp hike in the third quarter of 2022.” Similar to Goldman Sachs, HSBC also expects the overnight reverse repurchase rate — at which the BSP lends to banks — to normalize at 4 percent but at a slower pace — possibly 25-bp hikes for every quarter until the third quarter of next year.

“We believe that the BSP will remain mindful of slamming the brakes on the local economy with overly aggressive rate hikes. We maintain our BSP call for the next 25-bp hike in the third quarter and the third 25-bp hike in the fourth quarter of 2022,” UOB said. But Alex Holmes, Asia economist at London-based think tank Capital Economics, said “the BSP’s tightening cycle is unlikely to be aggressive.”“Given the [BSP] has started tightening policy a little sooner than we had previously expected, we are shifting forward our schedule for rate hikes and now expect the policy rate to finish the year at 2.75 percent . But that would still mean a gradual pace of tightening, with just one hike in each of the next two quarters,” Holmes said.

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