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STANDARD Chartered Bank expects the Bangko Sentral ng Pilipinas (BSP)
to keep its overnight rates steady in the near term, but sees a
percentage point reduction for the rate at which lenders borrow from
each other until the end of the year.
In a briefing, Nicholas Kwan, Standard Chartered
regional head of global research, said the lender expects the
central bank to cut 150 basis points throughout the year from the
current 5.25 overnight borrowing rate. The policy-making Monetary
Board of the BSP is scheduled to meet on the matter on March 18.
“The Philippines is in a very good position
because you have allowed the peso to appreciate so much, now it
takes less of inflationary pressure. You also started cutting your
interest rates early on so the tension or the stress on the real
sector is less. If anything, if the US interest rates will be cut by
100 basis points from now, there’s also more room for the local
rate to cut. My guess is 100-150 bps towards the end of the year,”
Kwan told reporters.
“If the US to cut 20 basis points, most of
central banks in the region may not be able to follow through,
somewhere 100 [to] 150 basis points. [It] depends on the
situation,” he added.
He said Philippine inflation will average 4
percent to 4.5 percent this year, or within the BSP’s target
range.
“Our assessment is that inflationary concern
would be short-term rather than long-term. Two reasons, inflationary
pressures mainly coming from outside—high fuel and food prices.
First of all, you cannot do much on it unless you think the peso to
strengthen further,” he said.
Due to short-term inflationary concern for the
Philippines, Kwan said this will give BSP a leeway in its key
interest rates.
As for the country’s growth prospects,
Standard Chartered is looking at a more conservative expansion of
4.1 percent for the economy, as measured by the country’s gross
domestic product. This is well below government’s 6.3 to 7 percent
forecast for this year.
-- Chino S. Leyco
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