MANILA – The research arm of the Union Bank of the Philippines (UnionBank) expects the Bangko Sentral ng Pilipinas (BSP) to hold key policy rates steady this month after inflation rate rose to 3.2 percent last May.
UnionBank chief economist Ruben Carlo Asuncion told the Philippine News Agency (PNA) that last month’s rate of price increases, which rose from last April’s 3 percent, is also higher than their 2.9 percent projection.
“This may signal that the BSP maintain its key rates,” he added.
The BSP’s policy-making Monetary Board (MB) reduced by 25 basis points the central bank’s key rates last May 9 due to sustained deceleration of domestic inflation rate, which peaked at 6.7 percent in September and October last year.
Among others, the current rate of the BSP’s reverse repurchase (RRP) facility is 4.5 percent.
On May 30, the Philippine Statistics Authority (PSA) traced the rise of last May’s inflation to the 3.4 percent annual rate of the heavily-weighted food and non-alcoholic beverages, and the 3.3 percent rate of the housing, water, electricity, gas, and other fuels index.
The BSP’s May 2019 inflation forecast ranges from 2.8 percent to 3.6 percent, with upside risks seen to come from select food items and “positive base effects” due to an elevated inflation rate of 4.5 percent in May 2018.
Average inflation in the first five months of the year stood at 3.6 percent, within the government’s 2 percent to 4 percent target band until 2020. (PNA)
