The Bangko Sentral ng Pilipinas (BSP) may retain its key policy settings until the first six months of 2014, according to ING Financial Markets economist.
Tim Condon, chief Asia economist at ING Financial Markets, said that the supply disruptions because of the impact of Super Typhoon Yolanda could cause an inflation spike.
He noted that the disruption prompted the BSP to raise 2013 inflation forecast to 3.2 percent from 3 percent and its 2014 forecast to 4.5 percent from 4 percent.
The BSP said that inflation could pick up in the remainder of the year given the damage to agricultural production and disruptions in the supply distribution channels, because of the recent typhoons that battered the country this year.
“However, like any hit to growth, an inflation spike would be transitory. Governor [Amando] Tetangco [Jr.] said there was no need to adjust policy. We reiterate our forecast that the BSP will be on hold through the first half of 2014,” he said.
The central bank has maintained its key policy settings since October last year, keeping interest rates for the overnight borrowing or reverse repurchase facility at 3.5 percent, while overnight lending or repurchase is at 5.5 percent. The reserve requirement ratios were kept steady as well.
Meanwhile, earlier this year, interest rates for the special deposit account (SDA) facility were slashed by a total of 150 basis points.
On the other hand, Condon said that ING is reviewing its gross domestic product (GDP) growth forecast for the Philippines this year.
“We are reviewing our 7.2 percent forecast for downward revision [for 7-percent consensus forecast],” he said.
He noted the government’s 4.1-percent to 5.9-percent estimated growth for the country on last quarter of 2013, adding that the low end would imply full-year growth of 6.5 percent.
The country’s GDP slowed down to 7 percent in the third quarter, lower than the first two quarters of the year, putting the year-to-date growth at 7.4 percent.