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Swiss bank expects BSP 'tightening' to go on


A Swiss bank on Tuesday said it expects the Bangko Sentral ng Pilipinas (BSP) to continue its monetary tightening stance amid the sluggish economic growth the Philippines experience in the first quarter of the year. In a report published Tuesday, the Union Bank of Switzerland (UBS) said the country’s first-quarter growth of 4.9 percent — from 7.3 percent in the same 2010 period — seems to reflect the gradual policy tightening by monetary authorities. “We continue to expect 50 basis points of policy rate increases in two 25- basis point steps over the next six months (to 5 percent). This will leave monetary policy settings fairly easy but could give some support to the currency as BSP rate hikes have lagged [behind] those elsewhere in the region as a result of hitherto benign inflation pressures," the UBS said. UBS also said it is keeping its 2011 growth forecast at 4.4 percent, slower than the official growth projection of 7 percent to 8 percent. The bank also said actual growth could go higher than 4.4 percent if the momentum is sustained and the global economic environment improves. Meanwhile, Barclays Capital said in a separate report it expects the Philippine economy to grow by 5 percent this year. “We expect business investment to remain relatively strong given still upbeat confidence, though businesses are concerned about elevated commodity prices," Barclays said. Earlier this month, the BSP raised policy rates by 25 basis points to curb inflation, which rose to a one-year high of 4.5 percent in April. The BSP, thus, pulled up the overnight borrowing rate to 4.5 percent from 4.25 percent, and the overnight lending rate to 6.5 percent from 6.25 percent. — PE/VS, GMA News

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