THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected to raise rates by another 75 basis points (bps), an economist from the Bank of the Philippine Islands (BPI) said.

At the same time, ANZ Research sees the BSP raising its benchmark rate to 5.25% by mid-June next year as it seeks to cool inflation.

In a statement, BPI Lead Economist Emilio S. Neri, Jr. said he hopes the BSP will not repeat the low-rate hike last June when “we were caught between two meetings of the FOMC (Federal Open Market Committee) with a much lower policy rate (adjustment).”

The Philippine central bank last week raised its benchmark policy rate by 50 bps to 4.25%. Rates on the overnight deposit and lending facilities also rose by 50 bps to 3.75% and 4.75%.

The Monetary Board has raised rates by 225 bps so far since May, including a 75-bp off-cycle hike in July.

Mr. Neri said the Fed is expected to continue its aggressive monetary tightening into 2023.

“[We are] not catching up with the higher, faster, longer signal of the FOMC. Several foreign banks have already mentioned in reports that we are seen as dovish,” he added.

Mr. Neri said a P60-per-dollar exchange rate is “just around the corner.”

The peso closed at P58.99 a dollar on Tuesday, dropping 49 centavos from its P58.50 finish on Friday, based on Bankers Association of the Philippines data. It has weakened by 15.66% or P7.99 from its P51-a-dollar close last year.

Mr. Neri added that a “mild policy rate hike” by the BSP at its Nov. 17 policy meeting might use up the country’s gross international reserves (GIR).

“The only thing that is preventing a 40%, 42% depreciation of the peso now, like in 1997, is probably that we have a GIR at seven months, which we have to be careful not to use up,” he said.

Latest data from the central bank showed dollar reserves stood at $98.98 billion as of end-August, slipping by 0.85% from the $99.83 billion as of end-July. It was also 8.3% lower from the $107.96-billion level a year ago, and marked the sixth consecutive month of decline.

The BSP expects to end the year with $105 billion in dollar reserves and $106 billion in 2023.

HIGHER RATES BY 2023

In its latest Asia Economic Outlook, ANZ Research expects the BSP to raise its key policy rates by 50 bps to end the year at 4.75% and another 50 bps to 5.25% by mid-2023. This is higher than the initial forecasts of 3.5% in 2022 and 4% in 2023.

“To some degree, these revisions reflect spillover from our hawkish Fed view. The stickiness of US inflation suggests the global inflation pulse is stronger. Some central banks will also be concerned about the inflationary implications of currency weakness against the dollar,” ANZ Research said.

The FOMC has hiked its federal fund rate by 300 bps since March to a target of 3-3.25%. ANZ Research sees a full percentage point increase by yearend.

“We expect the dollar to continue to appreciate until the first half of 2023. The strong dollar is helping the Fed in its inflation challenge, but complicating policy elsewhere,” it added.

ANZ Research also expects the consumer price index (CPI) in the Philippines to quicken to 5.6% this year, matching the central bank’s revised 5.6% average inflation forecast, and easing to 4.2% in 2023 and to 3% in 2024.

“Inflation is close to peaking in most economies owing to stabilizing food and energy prices, which carry large weights in the region’s CPI baskets,” ANZ said.

“At the same time, it is unlikely that inflation will quickly slip back into official target ranges. We think that a correction of this magnitude is feasible only in the second half of 2023 in most economies.”

Inflation quickened to 6.3% in August from a year earlier, exceeding the central bank’s 2-4% target for a fifth straight month. It averaged 4.9% in the first eight months.

ANZ Research also sees the economy expanding by 6.5% this year, matching the lower end of the government’s 6.5-7.5% target.