No change in policy rate expected

PHILIPPINES - In Brief 16 Jun 2017 by Romeo Bernardo
How likely is it that the BSP will raise interest rates when the Monetary Board meets on Thursday, June 22? The question has come up following the US Fed’s decision to hike its policy rate by 25bp on Wednesday. The move brought the cumulative increase in the US policy rate since December last year to 75bp even as the BSP has kept its rates unchanged. While the Fed move was largely anticipated, it nevertheless cast a shadow over local markets. Over the last two days, the peso lost nearly 40 centavos against the dollar to close at P49.90/$ today, the composite stock index fell a little over 1% and local yields were higher by 8.9bp on average. Press statements of outgoing governor, Amando Tetangco, who will chair the Monetary Board meeting for the last time next Thursday, point to a high likelihood that local rates will remain intact; especially with the inflation rate having fallen to 3.1% in May (after climbing steadily since 2Q16 to reach 3.4% in March). Deputy Governor Nestor Espenilla will take over the helm of the BSP on July 3 and has promised policy continuity.

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