BSP seen raising rates before end of 2015

INTEREST rates may be raised slightly toward the end of the year as the central bank tries to fend off volatility in financial markets by keeping up with the US Federal Reserve.

Dutch financial giant ING said in a note to clients that the Bangko Sentral ng Pilipinas (BSP) would take its time before adjusting rates again, citing the space given by low inflation.

Barring supply shocks, ING’s economist in Manila Joey Cuyegkeng said the BSP would increase rates by a total of 50 basis points in the second half of 2015. The BSP’s benchmark overnight borrowing and lending rates stand at 4 and 6 percent, respectively. Both rates are half a percentage point higher than their record lows.

This comes amid expectations that consumer price inflation has bottomed out at the start of the year.

For March, inflation was expected to hit 2.6 percent, slightly faster than February’s 2.5 percent, Cuyegkeng said. In January, inflation averaged 2.4 percent, a five-year low.

Data for March inflation will be released Tuesday.

‘‘The fall in inflation from its recent peak of 4.9 percent in August has come in from the food, housing and utilities and transport components,’’ Cuyegkeng said.

‘‘Lower global oil prices mean lower electricity tariffs and lower gasoline prices, which make it cheaper to transport food from farm to market,’’ he said. The bank economist said inflation was still expected to average between 2 and 4 percent, the BSPÆs official target range for the year.

The BSPÆs main goal is to protect consumers’ purchasing power by keeping prices stable. This is done by adjusting the cost of money and managing the amount of cash circulating in the economy.

At its latest policy meeting in the middle of March, the BSPÆs policymaking Monetary Board kept interest rates stable. Other tools such as banks’ reserve requirement and special deposit account (SDA) rates were also kept steady.

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