Market expects BSP to tighten policy at tomorrow’s meeting
Bangko Sentral ng Pilipinas (BSP) will hold its May policy meeting tomorrow and the market is once again speculating how the central bank will tackle flush liquidity in the Philippines. Consensus expects BSP to increase reserve ratio requirements (RRR) by 1% while holding interest rates, echoing the last BSP decision (27 March) to tighten through RRR. UBS Economics takes a slightly more hawkish view; for the remainder of 2014 BSP is expected to raise rates by a total of 50 bps in order to stay on track with BSP’s 2015 inflation target of 3% (see “Philippines: Meetings in Manila,” 21 April 2014 by Ed Teather). Including tomorrow’s meeting, six policy decisions remain for 2014, and rate hikes could begin as soon as tomorrow in the form of a 25 bps hike to Reverse Repurchase (RRP) and Special Deposit Account (SDA) rates, currently 3.50% and 2.00%, respectively.
Read the full report: UBS