ING BANK N.V. and Capital Economics said the Bangko Sentral ng Pilipinas (BSP) is unlikely to hike interest rates even as inflation continued to pick up in February.

In a report posted on Wednesday, ING Bank Manila branch senior economist Jose Mario I. Cuyegkeng said they are expecting the BSP to keep policy settings unchanged at this month’s review.

“With BSP’s conviction and reiteration, we now expect a steady monetary policy decision at the March 22 policy rate meeting,” Mr. Cuyegkeng said.

This comes despite the upward trend in inflation. On Tuesday, the Philippine Statistics Authority reported that prices of widely used goods rose 4.5% in February, calculated using the older model based on 2006 prices. This picked up from 4% in January as well as 4.2% consensus among economists in a BusinessWorld poll.

Inflation also rose to 3.9% in February when calculated using 2012 as the new base year, faster than 3.4% booked the previous month and 3.1% in February last year.


Mr. Cuyegkeng attributed the quicker inflation print last month to the “[t]ax reform related impact together with higher oil prices, power rates and food prices,” adding that the price pressure will keep inflation elevated in the next six months.

But despite the recent trend of rising prices of goods and services, global economic research firm Capital Economics shared the sentiment of the BSP that higher inflation is only transitory.

“[T]he jump in inflation since the start of the year has been mainly down to temporary factors, most notably an increase in indirect taxes on high-sugar drinks, tobacco and alcohol,” Capital Economics said. “Although the year-on-year rate of inflation will remain elevated throughout 2018, it should drop back at the start of next year.”

“We continue to believe that interest rates in the Philippines will remain on hold at least until the end of the year,” Capital Economics said in a report.

BSP Governor Nestor A. Espenilla, Jr. said this week that the continued pickup of inflation will not necessarily prompt the central bank to tighten its monetary policy setting in their next meeting.

“The elevated February inflation figure is in line with our updates forecast for a temporarily higher inflation than target range in 2018 due to transitory factors,” Mr. Espenilla said in a text message to reporters on Tuesday.

“That’s why we don’t necessary react to February 2018, but must look much further ahead and rely on forecasts.” — K.A.N. Vidal