BSP to raise rates twice in 2018 —FMIC

The Bangko Sentral ng Pilipinas (BSP) is expected to raise policy rates two times this year in line with the highly anticipated increase in US interest rates.

“We expect the Fed to hike its rates. The BSP may finally follow as well, adjusting its policy rate once or twice,” Christopher Ma. Carmelo Salazar, Senior Vice President at First Metro Investment Corp. (FMIC), said in a briefing in Makati City.

The US Federal Open Market Committee (FOMC) is highly anticipated to raise its rates anew this year.

“Most economists see three increases again in 2018, but will watch to see if more Fed officials forecast four rate hikes or make any mention of the tax cuts’ likely impact on economic growth,” according to a Reuters report in December.

Salazar said the BSP will likely follow the Fed this time around.

“As the Fed continues to move higher in terms of their policy rates, I think the BSP will also be trying to move in the same direction as the Fed,” he said.

Inflation is expected to accelerate on the heels of the Tax Reform for Acceleration and Inclusion (TRAIN) law.

“Inflation will be higher this year because of the TRAIN ... There is room for rates to be adjusted upwards,” he said.

The tax reform bill was signed into law by President Rodrigo Duterte on Dec. 19, 2017 which reduced the personal income tax and expanded the value-added tax base.

During a policy meeting last month, the BSP’s Monetary Board kept the overnight lending rate unchanged at 3.5 percent, the overnight borrowing also unchanged at 3.0 percent as well as the overnight deposit rate at 2.5 percent. — VDS, GMA News