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HSBC Global Research sees PHL rate hike in Q4

HSBC GLOBAL Research expects the Bangko Sentral ng Pilipinas (BSP) to raise its benchmark rate by another 25 basis points (bps) in the fourth quarter due to heightened global inflation risks.

The projected policy move in the three months to December will depend on whether the planned tariff reduction on rice is sufficient, HSBC Global Research Association of Southeast Asian Nations economist Aris Dacanay said in a report on Monday.

“We change our call, however, for 4Q 2023 and pencil in another 25 bp hike to 6.50% in consideration of the recent surge in global rice prices but flag that the hike will be inter-policy dependent; the BSP will unlikely hike the policy rate if the planned tariff reduction on rice is sufficient,” he said.

Mr. Dacanay also reiterated his forecast for the BSP to hold its benchmark rate at its meeting on Thursday even after inflation accelerated in August.

Headline inflation accelerated for the first time in seven months to 5.3% in August from 4.7% in July. Inflation averaged 6.6% in the eight-month period.

Along with 13 other analysts, Mr. Dacanay was part of the majority of 17 analysts in a BusinessWorld poll conducted last week that sees the BSP maintaining its policy rate at a near 16-year high of 6.25%.

The BSP extended its policy pause for a third straight time at its Aug. 17 meeting, keeping the benchmark interest rate at a near 16-year high of 6.25%.

The central bank raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.

He likewise maintained his forecast for the BSP to begin its easing cycle in the second quarter next year, matching HSBC Global Research’s outlook for the Federal Reserve’s own easing cycle.

“Due to a wide current account deficit and the renewed strength in the dollar, we continue to expect the BSP to cut its policy rate only after the Fed cuts its rate. Our baseline forecast is for the Fed to begin its easing cycle in 2Q 2024,” Mr. Dacanay said.

The Fed raised interest rates by 25 bps last month, bringing its benchmark overnight rate to a range between 5.25% and 5.5%.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

The Fed will meet on Sept. 19-20 to review its policy settings. — Aaron Michael C. Sy

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