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Business

Think tank expects BSP to keep rates unchanged

Louella Desiderio - The Philippine Star
Think tank expects BSP to keep rates unchanged
In a report, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and senior Asia economist Moorthy Krshnan said they expect the Monetary Board to keep the key policy rate steady at 6.25 percent.
STAR / File

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to leave the benchmark interest rate untouched on Thursday even as the headline inflation rate accelerated for the first time in seven months in August, according to United Kingdom-based think tank Pantheon Macroeconomics.

In a report, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and senior Asia economist Moorthy Krshnan said they expect the Monetary Board to keep the key policy rate steady at 6.25 percent.

“The surprise rebound in inflation in August is unlikely to challenge the BSP’s current pause as the result was within its nowcast range,” they said.

The country’s headline inflation rate quickened to 5.3 percent in August, ending a six-month downtrend, due mainly to faster upticks in rice and vegetable prices.

Rice inflation rose to 8.7 percent in August from 4.2 percent in July.

Vegetable inflation also accelerated to 31.9 percent in August from 21.8 percent in July.

The August inflation rate was within the BSP’s forecast of 4.8 to 5.6 percent for that month.

From   January to August, inflation averaged 6.6 percent, still above the BSP’s two to four percent target range.

“Our view for 50 bp of cuts in Q4 (fourth quarter) to support the economy still stands, but upside risks to this forecast are building,” Chanco and Krshnan said.

The economy expanded by 4.3 percent in the second quarter, slower than the 6.4 percent growth in the previous quarter, and 7.5 percent expansion in the second quarter last year. This brought first semester growth to 5.3 percent.

Last month, Pantheon Macroeconomics trimmed its economic growth forecast for the Philippines to 4.5 percent from 5.5 percent, previously, following the slower gross domestic product result in the second quarter.

The forecast is way below the government’s six to seven percent economic growth target for the year.

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