BSP seen to keep key rates steady

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is expected to keep policy rates on hold when it meets for the last time this year, UK-based Barclays said.

“We expect the BSP to keep rates unchanged as it looks through any typhoon-related spike in inflation,” the investment bank said in its Global Economics Weekly report.

The BSP is set to revisit policy settings for the last time this year on Thursday, Dec. 12.

The central bank’s policy-making Monetary Board has kept overnight borrowing and lending rates at 3.5 percent and 5.5 percent, respectively, since the start of the year.

The policy rates were maintained amid a benign inflation environment and robust economic growth.

Inflation has so far averaged 2.8 percent in the 11 months to November, still slightly below the BSP’s three to five percent target range. The manageable inflation has remained supportive of the country’s 7.4 percent growth as of September.

But Barclays foresee inflation to accelerate next year that may prompt the central bank to increase rates in the third quarter of 2014.

“Given the lagged impact of strong growth, inflation will rise towards the upper bound of the central bank’s three to five percent target range by mid-2014,” Barclays said.

“We continue to expect a 25-basis-point rate hike in third quarter 2014,” the bank pointed out.