THE CENTRAL BANK is expected to resume raising key rates and banks’ mandated reserves in order to put the economy in a better position to weather any prospective “sizeable inflation shock.”
Switzerland-based financial services group Credit Suisse said in a note written after the Monetary Board’s meeting last Thursday, but released only yesterday, that it expects the central bank’s governing body to hike key rates by another 50 basis points (bps) and to raise by another percentage point (pp) banks’ reserve requirement this year.
In its meeting last June 16, the Monetary Board kept policy rates steady at 4.5% for overnight borrowing and 6.5% for overnight lending, after raising them by a total of 50 bps, so far, since the start of the year. At the same time, however, the board raised the reserve requirement for deposits and deposit substitutes of banks and nonbanks with quasi-banking functions by 1 pp, to take effect this Friday.
“We continue to expect another 50 bps in interest rate hikes and possibly another 1 pp hike in the reserve ratio for 2011,” Credit Suisse said.
Read more at Business World