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By Maricel E. Burgonio Reporter
THE Bangko Sentral ng Pilipinas (BSP)
is likely to ease up on its tight monetary policy in the second half
of the year, according to a securities firm.
“The increase in core inflation
is decelerating, at least in May, is positive in this context. If it
continues, it may not require too much more monetary tightening,”
ATR Kim Eng Securities Inc. said in a report.
BSP recently hiked its interest
rates by 25 basis points, lifting the overnight borrowing and
lending rates to 5.25 percent and 7.25 percent, respectively.
“We see the 25 basis points as
implementation of the policy statement that the monetary policy
settings would adjust as and when second round effects of supply
shocks became evident,” ATR said.
The securities firm said core
inflation, which flattened in May at 6.2 percent, is significant for
monetary policy, which looks for second-round effects of supply
shocks caused by high food and fuel prices.
“With retail food price
increases now moderating, including that for rice, we expect the
flattening in core inflation will continue and eventually induce the
same trend in headline inflation,” it said.
Headline inflation surged to 9.6
percent in May, the highest since January 1999, from 8.3 percent in
April. More than 70 percent of the May inflation rate was due to
food, beverage and tobacco, which accounted for 50 percent of
consumer basket.
The BSP earlier said inflation
may hit its peak of 11 percent this month, before moderating in the
second half.
ATR also expects inflation to
moderate in the second half this year, but at a slower pace than
earlier expected due to record prices of rice and other commodities.
The BSP adjusted its assumption
for Dubai crude to a range of $115 to $125 a barrel this year.
Inflation is seen reaching 7 percent to 9 percent.
“Because of this and also due
to lower gross domestic product (GDP) growth than originally
expected, we believe this tightening round will be short-lived,”
ATR said.
The government expects GDP growth
to hit 5.7 percent to 6.5 percent, lower than its earlier target of
6.1 percent to 6.7 percent.
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