Standard Chartered economist for Asia Chidu Naranayan (Photo courtesy of Mr. Naranayan)
MANILA -- An economist of Standard Chartered Bank (Standard Chartered) forecasts an additional 25 basis point reduction in the Bangko Sentral ng Pilipinas (BSP) on Thursday after the same cut was done last May.
In a report, Standard Chartered economist for Asia Chidu Naranayan said he expects Philippine monetary officials to cut key rates this year after hiking it by 175 basis points in 2018.
“We forecast cuts of 100 bps by BSP in consecutive meetings,” he said.
“We expect further rate cuts at BSP’s August and September meetings,” he said, referring to the fifth and sixth rate setting meet of the policy-making Monetary Board (MB) meeting for this year.
The economist said easing inflation rates is a factor for the projected cuts in the BSP’s policy rates.
Last May, inflation rose to 3.2 percent from month-ago’s 3 percent, ending its six-month deceleration.
However, authorities expect this development to reverse in the coming months and they are banking on expectations of less price pressures.
Average inflation in the first five months this year stood at 3.6 percent, within the government’s 2 to 4 percent target band until 2020.
During the rate setting meet of the MB last May 9, it cut the average inflation forecast this year from three percent to 2.9 percent given the developments on oil prices overseas.
Narayanan said the uptick of inflation last May “was likely a one-off, driven primarily by a low base in 2018.”
Data from the Philippine Statistics Authority (PSA) show that inflation in May 2018 is higher at 4.6 percent.
“We expect inflation to drop below the bottom of BSP’s 2-4 percent inflation target. Declining inflation, subdued credit growth and a soft growth outlook are likely to support further easing from BSP,” Narayanan added. (PNA)
