Investors want ‘more aggressive’ BSP against inflation

Despite the Bangko Sentral ng Pilipinas’ (BSP) recent decision to hike interest rates, a need for a “more hawkish tone” from the agency is even more important for the Philippine currency and bond markets to cope up amid its losing streak, Bloomberg said Monday.

The call was made after investors were fretting over whether policymakers are softening their fight against rising inflation, which hit 4.6 percent last month, the fastest on record since 2013.

The peso touched a 12-year low against the greenback due to “persistent weakness in the bond market, where yields are at seven-year highs, further signal skepticism about the effectiveness of last month’s rate hike in slowing inflation.”

The report also stated that the BSP’s policy rate of 3.25 percent is “deep in negative territory after adjusting for inflation” and “appears too low for an economy that has expanded more than six percent each quarter since mid-2015.”

Such concerns were reflected in the bond markets as investors demand higher compensation for the risks of shrinking real returns. The benchmark five-year bond yield soared to 5.93 percent on June 14, the highest since 2011.

Moves calling for a more aggressive approach in tackling inflation also came even after National Economic Development Authority (NEDA) chief Ernesto M. Pernia said he expects inflation to slow down this month as he forecasts commodity prices to calm.

Speaking to reporters, the socioeconomic planning head said that the 4.6% inflation rate in May could be the highest to be recorded for the year. Merrowen Mendoza / Komfie Manalo