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MANILA, Philippines – A jumbo half-point rate hike may be looming as the Philippines confronts the twin threats of sluggish growth and red-hot inflation, HSBC Global Investment Research said, warning that a prolonged Middle East conflict is pushing the “adverse” scenario closer to reality.
In a note to clients, Aris Dacanay, a senior Asean economist at HSBC, said the Bangko Sentral ng Pilipinas (BSP) could deliver a total of 1.5 percentage points in rate increases this year, a move that would bring the benchmark rate to 6 percent.
He added that policymakers may accelerate the pace of tightening as soon as June, opting for a half-point increase instead of the usual quarter-point steps to prevent inflation from spreading more broadly. Dacanay warned that a recent string of bad data suggests the economy may already be drifting away from HSBC’s baseline outlook and toward the adverse scenario.
Already, consumer prices rose 7.2 percent from a year earlier in April, the fastest pace in three years, as higher energy costs quickly spilled over to other household essentials. The April surge marked the second straight month inflation breached the central bank’s 2 percent to 4 percent target range.
