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PREVIEW-Philippine cbank seen not yet ready to hike rates yet even as prices pick up
February 8, 2017 / 7:35 AM / 10 months ago

PREVIEW-Philippine cbank seen not yet ready to hike rates yet even as prices pick up

* All 10 economists in poll see no change in main rate on Feb. 9

* Some economists expect to hike rates this year

* Inflation at 2-yr highs but still in cbank’s comfort range

* Decision due on Thursday, Feb 9 at 0800 GMT

MANILA, Feb 8 (Reuters) - The Philippine central bank is not expected to pull the rate-hike trigger just yet, even after inflation hit a two-year high in January, as it waits for more compelling reasons to tighten policy, a Reuters poll showed.

Economists expect the Bangko Sentral ng Pilipinas (BSP) to keep its overnight policy rate steady at 3.0 percent on Thursday, even after inflation accelerated for a third straight month in January.

While inflation quickened to 2.7 percent in January, it remained within the central bank’s 2-4 percent comfort range.

“That should allow the BSP to comfortably keep rates on hold,” said Trinh Nguyen, economist at Natixis in Hong Kong.

The central bank has not tinkered with interest rates since it raised the benchmark rate by 25 basis points in September 2014, as inflation has remained manageable despite strong economic growth.

But it set the main rate at 3.0 percent when it moved to an interest rate corridor system in June to make policy transmission faster and more efficient.

It has also been reducing cash in the banking system to guide market interest rates towards its main policy rate through its term deposit facility introduced last year.

“The BSP continued to accept high bids for its term deposit facilities. We view this as a signal from the central bank of its increasing bias to tighten policy rates in the medium term,” said Eugenia Victorino, economist at ANZ in Singapore.

BSP Governor Amando Tetangco has cited the weak global outlook, expectations of tighter U.S. monetary policy and domestic politics as among the factors that could hurt growth this year.

He has repeatedly said the central bank was ready to act but saw no urgency to move at this point in time.

Some economists are convinced the central bank will raise interest rates this year, for the first time in more than two years, to keep inflationary pressures in check.

The Philippine economy grew faster than expected at the end of last year on robust domestic demand and infrastructure spending, and is also seeing rising fuel costs.

“Inflation is on the rise and GDP growth momentum is solid. There is no reason to keep rates at the current low levels,” said Gundy Cahyadi, economist at DBS in Singapore.

Reporting by Karen Lema; Editing by Kim Coghill

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