BSP to hike policy rates twice this year – FMIC

The Bangko Sentral ng Pilipinas (BSP) is expected to raise interest rates twice in this year, in line with pronouncements by the US Federal Reserve that it may further increase policy rates this year, First Metro Investment Corp. (FMIC) said Thursday.

“We think rates will be going higher in 2017. We believe BSP will also do two hikes to be in line with the Fed and also to counter higher inflation locally,” Christopher Ma. Carmelo Y. Salazar, senior vice president and Financial Markets Group head at FMIC, told reporters during the FMIC Annual Economic & Capital Markets Briefing in Makati City.

FMIC Executive Vice President Justino Juan R. Ocampo said the BSP rate increase will likely be 25 to 50 basis points.

The Fed raised last month its benchmark interest rate by a quarter percentage point, citing an improving economy during its first policy meeting after US President-elect Donald Trump’s election victory.

“The policy-setting Federal Open Market Committee (FOMC) voted unanimously to increase the key federal funds rate to a range of 0.5 to 0.75 percent, but repeated that it expects the economy will require only ‘gradual’ increases going forward,” Agence France-Presse said in a report.

For his part, BSP Governor Amando M. Tetangco, Jr. earlier said the latest decision of the Fed won’t have any major, long-term impact on the Philippine financial system.

“The market would likely not dwell too much on that, because the market also knows that those dots do change over time. I am hopeful the recent US dollar-Philippine peso movements have also factored these in and that any further movement during the balance of the year would only just be small refinements to bank positions,” he said in December.

In its December 22 policy meeting, the Monetary Board decided to keep its policy settings unchanged, based on the assessment of inflation dynamics and the risks to the inflation outlook over the policy horizon.

"In addition, the Monetary Board has considered the potential impact of the ongoing monetary policy adjustment in the US on global financial conditions," Tetangco said.

"The Monetary Board also noted that maintaining monetary policy settings at this juncture will give the BSP more time to assess evolving economic developments and calibrate its policy tools as appropriate," he added. — VS, GMA News