Think tank: Next rate hike may only be 25 bps

THE Monetary Board is expected to raise interest rates by only 25 basis points in its next policy meeting, according to a local private think tank, First Metro Investment Corp.University of Asia and the Pacific (FMIC-UA&P) Capital Markets Research.

In its latest Market Call report, the think tank said inflation is expected to cool and average 8.1 percent in the first quarter of 2023. This may be the impetus for the

Bangko Sentral ng Pilipinas (BSP) to raise rates at a slower pace of 25 basis points.

Last week, the Monetary Board raised interest rates by 50 basis points, effectively increasing overnight reverse repurchase facility rates to 6 percent.

“Consistent with our forecast that Q1 inflation will average 8.1 percent, the Monetary Board increased policy rates by 50 bps to 6 percent in its February 16 meeting to keep inflation expectations in check, and minimize second round effects,” FMIC-UA&P Capital Markets Research said.

The think tank expects inflation to continue easing. But it will not be until the second semester of the year when the slowdown in inflation will be faster.

“Notably, Thai rice prices, 5 percent broken, have risen by 21.7 percent year on year by January and threaten to upset expectedly milder food inflation in the second quarter,” the FMIC-UA&P Capital

Markets Research said.

Overall, the think tank said the Philippine economy is expected to “weather the global recession relatively unscathed” this year on the back of a positive growth in jobs and increased infrastructure spending.

“[The] manufacturing sub-sector gains may continue to drive domestic demand despite elevated inflation rates. The personal income

See “25 bps,” A2