Analysts forecast hike in policy, SDA rates
Ted P. Torres (The Philippine Star) - May 11, 2014 - 12:00am

MANILA, Philippines - Following the Bangko Sentral ng Pilipinas (BSP) move to raise banks’ reserve requirement ratio (RRR) by one percentage point to 20 percent, analysts said the monetary regulator will likely increase by a total of 50 basis points (bps) its policy and special deposit account (SDA) rates.

HongKong and Shanghai Banking Corp. (HSBC) is putting its bet on a policy rate increase while the Australia and New Zealand Banking Group Ltd. (ANZ) said the BSP would work on the SDA rate, but both agreeing that continued tightening will be implemented in 2014.

HSBC economist Trinh Nguyen said the two RRR hikes (one ppt Thursday and one ppt last March) will soak up about P128 billion, a small amount compared to those released from the SDA and the subsequent increase in deposits.

“This means that further tightening is still required,” Nguyen said.

The BSP is seen to be raising the RRR by another percentage point this June, along with a 25-bps hike in policy. Another 25-bps increase will likely be warranted sometime in the fourth quarter.

“We expect further tightening of monetary conditions   with macroprudential measures followed by at least 50 bps hikes in SDA rates this year. Adjustments in the policy toolkit could include the reinstatement of varying SDA rates to differentiate SDA maturities,” the HSBC economist said. 

ANZ economist Eugenia F. Victorino said the BSP is expected to further tighten monetary conditions with macroprudential measures, including a 50-bps hike in SDA rates this year.

BSP Deputy Governor Diwa Guinigundo had said that the next move will be data dependent.

Headline inflation will accelerate on higher food inflation. Already, April headline inflation picked up to 4.1percent from 3.9 percent in March on higher food and housing costs. The effects of Super Typhoon Yolanda are lingering, impacting on the supply of rice and sugar.

Coupled with this, weather experts estimate that the Philippines will likely receive below-average rainfall in the fourth quarter of 2014 and first three months of 2015 and have a more volatile tropical cyclone pattern and track.

AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD DEPUTY GOVERNOR DIWA GUINIGUNDO EUGENIA F FOLLOWING THE BANGKO SENTRAL NGUYEN PILIPINAS SDA SHANGHAI BANKING CORP SUPER TYPHOON YOLANDA TRINH NGUYEN VICTORINO
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