Analysts mixed on monetary policy moves

EXPECTATIONS regarding next week’s monetary policy announcements are mixed, with analysts’ forecasts ranging from a tightening pause to both a reserve requirement tweak and an interest rate hike.

Three out of seven analysts polled by BusinessWorld said the Monetary Board would likely raise the bank reserve requirement anew when it meets on July 28, pointing out the need to keep inflation expectations anchored.

Another said regulators could resume hiking policy rates by 25 basis points along with another one percentage point increase in the reserve requirement.

The remaining three, meanwhile, said a pause was likely.

“I think they (monetary officials) will leave overnight rates unchanged, but they will sustain another reserve requirement increase of one percentage point,” Citibank economist Francisco G. Trinidad, Jr. said in a telephone interview.

“I sense that there still is a sense to provide monetary anchor to inflation expectations that are still elevated but not moving up as much they used to be.”

“Non-interest tools,” added Mr. Trinidad, are more appropriate in preempting inflationary pressures traced to a “strong portfolio environment.”

Rizal Commercial Banking Corp. Senior Vice-President and Treasurer Marcelo E. Ayes, in a separate telephone interview, concurred: “The reserve requirement may be raised by another one percentage point to 21%. You have to address inflation expectations and liquidity.”

Read more at Business World

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