Macroeconomic Forecast Philippines

The decision by the Banko Sentral ng Pilipinas (BSP) to keep policy rates on hold in their November 5 meeting comes as no surprise to us. Indeed, the announcement is fully in line with our view that despite the recent uptick in inflation, and our forecast of more inflation to come, policy rates will not experience any near-term hikes. On the contrary, we expect monetary tightening to be delayed until H210, and even then for rates to be increased by only a very modest 25bps by the end of next year. This is because CPI inflation is now below the central bank's 2009 inflation target of 3.5% (+/-1.0%) and well below the 2010 target of 4.5% (+/-1.0%), allowing a more accomodative stance.

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