DBS sees Bangko Sentral keeping key rates steady

The Bangko Sentral ng Pilipinas (BSP) will likely keep interest rates steady this Thursday as May inflation rates stayed within the targets for the year, Singapore-based DBS Bank Ltd. said on Tuesday. "In the Philippines, the fact that the annual headline inflation rate stayed at 4.5 percent in May allows BSP to slow its tightening cycle," DBS pointed out. "With inflation still below the upper limit of the BSP’s target range, the central bank might not hike rates this week, especially if inflation forecasts for this year and 2012 are not revised sharply higher on Thursday," it added. The BSP has programmed an inflation target range of 3 percent to 5 percent for the year. In May, inflation soared to a 13-month high of 4.5 percent from the revised 4.3 percent in April. This has led economists and analysts to say that the BSP will once again raise key interest rates by 25 basis points on June 16 to keep inflation expectations well-anchored. http://www.gmanews.tv/story/222691/business/bsp-to-raise-policy-rates-anew-say-economists Thus far, the BSP has raised interest rates by 50 basis points this year, once in March and again in May. This brought the overnight borrowing rate to 4.5 percent and the overnight lending rate to 6.5 percent. However, the investment bank said inflation would be above 5 percent in the latter half of the year, which would prompt the Monetary Board to raise interest rates by another 25 basis points in the third quarter and 25 basis points in the third quarter of the year. Once implemented, this would bring the overnight borrowing rate to 5 percent and the overnight lending rate to 7 percent. "If inflation continues to rise, the central bank will have to continue with policy tightening and bond yields will rise," DBS stressed. —JMT/VS, GMA News