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CONSUMER price increases will pick up further in the second half,
prompting the Bangko Sentral ng Pilipinas (BSP) to raise its key
interest rates, according to a United States-based financial
services company.
In a weekly note to clients, Merrill Lynch said
the BSP will raise overnight borrowing and lending rates by 25 basis
points anytime between July and December, from the present 5.25
percent and 7.25 percent, respectively.
Merrill Lynch said the Monetary Board will start
increasing its rates this month, and in August.
It also said the BSP will maintain the rates in
September, and then resume raising them in October and November.
In a separate report, Edward Teather, economist
at UBS Investment Research also said the BSP would raise its policy
rates by 100 basis points over the next 12 months.
“The differential between actual inflation and
the policy target is greater now, but the triggers for a policy rate
adjustment will remain the same. Watch for higher than expected
minimum wage growth, evidence of sustained increases in inflation
expectations and broad based increases in inflation,” Teather
said.
The UBS economist said inflation this year would
average 7.2 percent, higher than the investment bank’s original
forecast of 6.7 percent, and last year’s actual 2.8 percent.
BSP Deputy Gov. Diwa Guni-gundo said the second
round effects of inflation will drive monetary authorities to adjust
policy rates.
Guinigundo had said inflation will peak towards
the second quarter of the year and decline in the fourth quarter.
-- Chino S. Leyco
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