Economists see further increases in BSP rates

The path of the Federal Reserve’s key rates, the domestic inflation and the peso’s performance are expected factors on the future adjustments in the Bangko Sentral ng Pilipinas’ (BSP) key rates.

On Thursday, the central bank’s policy-making Monetary Board (MB) hiked the BSP’s key rates by 50 basis points, to 6 percent for the overnight reverse repurchase (RRP) rate, after noting the higher-than-expected January 2023 inflation rate of 8.7 percent, among others.

market remains strong,” he said.

Ricafort said the BSP’s key rates would likely match future Fed rate hikes and the market expects two to three more rate hikes until June this year.

spent more than USD2.3 billion in the Philippines for their vacation here.

Last year, the Philippines received over 2.65 million tourists, still far from the pre-Covid tourist arrival of more than 8.26 million.

To supply accommodation to the potential international visitors this year, Santos said there will be 2,692 new hotel rooms that will be launched in Metro Manila alone between 2023 and 2024.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the latest rate adjustment in the central bank’s key rates is the eighth consecutive hike while the RRP rate, which will take effect this Friday, is the highest in more than 15 years or since July 2007.

“Local policy rates would still be largely a function of the local inflation trend as well as the future Fed rate hikes after the recent signals from Fed Chair (Jerome) Powell on possible higher peak in Fed(eral Reserve) Funds Rate especially if the US labor/employment

“As a result, any additional Fed rate hikes of about +0.25 each especially on March 22, 2023 and May 2, 2023 could be, at least, matched locally on the next local rate-setting meetings on March 23, 2023 and on May 18, 2022 to maintain a more comfortable interest rate differential that help stabilize the peso exchange rate and overall inflation,” he said.

Ricafort said “timeliness and size of any future local policy rate hikes would also be a function of the behavior of peso exchange rate given its impact on import prices and overall inflation.”

“So if the peso exchange rate is relatively stable, any future local policy rate adjustments would just match any future Fed rate moves in the near future,” he added.

On Thursday, the peso closed the day sideways against the greenback at PHP55.12 from day-ago’s PHP55.17.