By Lee C. Chipongian The central bank is expected to raise key rates at its meeting today and another one next month with inflation now projected to climb to a peak of six percent by August, according to a foreign bank. Standard Chartered Bank’s economist Chidu Narayanan said the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board will likely hike rates twice this year – on May 10 and June 21 – which was earlier than previously projected of third quarter or the fourth quarter at the latest. The two back-to-back rates’ increase follows the bank’s higher inflation estimates for 2018 and 2019 of 5.2 percent (using 2012 base year) and 4.9 percent, both exceeding the government target of two percent to four percent. If the bank’s estimate of six percent for August inflation materializes, they could see a third hike happening this year. “We expect the central bank to raise policy rates as early as its May 10 meeting, hiking the overnight borrowing rate to 3.25 percent from three percent currently, followed by one more in June (versus our previous forecast of hikes in third quarter and fourth quarter),” said Narayanan in the Stanchart’s “Economic Alert” report. “We had expected a rate hike in the first quarter on concerns about a rapid increase in inflation and very loose monetary conditions (but) BSP’s reluctance to hike caused us to push our call for hikes to later in the year,” he noted. “The central bank has since changed its stance as inflation continued to edge up, in line with our forecast.” The Philippines' robust economy in the first quarter will likely boost chances for a rise in interest rates on Thursday, the first increase in more than three years to curb cost pressures, Reuters said. Gross domestic product data for the January-March quarter, expected to show the economy grew at a brisk pace, will be released hours ahead of the central bank's rate decision. The BSP, growing more concerned about rising inflation expectations after consumer prices accelerated in April, the highest in at least five-years, is widely expected to raise rates, a Reuters poll found. Inflation is seen moving further away from the central bank's 2-4 percent target range due to rising oil prices and additional taxes on some commodities. The majority of economists polled by Reuters believe conditions are ripe for a rate hike. "We expect the BSP to hike its policy rate by 25 bp (basis points) at its upcoming meeting to defend its inflation target and to keep inflation expectations anchored," said Noelan Arbis, economist at HSBC in Hong Kong. Arbis' call was shared by 10 other economists in a Reuters poll of 12 respondents. The lone dissenter had pencilled in no movement in rates on Thursday. If economists are right, the Philippines would be the third central bank in Southeast Asia to tighten policy this year after Malaysia and Singapore. It has kept policy settings steady since a 25 basis point rate increase in September 2014. Some economists forecast further rate rises later in the year, with at least one calling for two more rate increases after Thursday's expected move. A rate increase could provide "temporary" support for the weak peso, said Chidu Narayanan, economist at Standard Chartered Bank in Singapore, as "the structural drivers of medium-term Philippine peso weakness remain intact." The peso has dropped 4 percent since the start of the year. Stanchart said inflation will rise to six percent in August before slowing down. “Monetary conditions are among the loosest in three years on strong credit growth, low real interest rates and a depreciating currency. Rising inflation will cause monetary conditions to loosen further, forcing BSP to hike rates again, possibly as early as in June,” said Narayanan. He said after June, the BSP will “pause after the two successive rate hikes to evaluate its impact.” The economist added that inflation is likely to moderate in the last quarter of the year, providing some comfort to BSP and reducing the risk of further tightening. “A likely bottoming out of the current account, combined with a weaker US dollar, is likely to cap currency depreciation, reducing the pressure on BSP to hike.” The last time the BSP raised rates was in September 2014. It adjusted policy stance higher twice that year, beginning in July 2014. The Philippines’ $314 billion economy was forecast to have grown an annual 6.8 percent in the first quarter, faster than the 6.5 percent pace in the fourth quarter - marking its 77th quarter of uninterrupted growth. On a quarter-on-quarter basis, GDP was estimated to have expanded a seasonally adjusted 1.5 percent, according to the median forecast of three analysts with quarterly estimates, in line with the previous quarter. (With Reuters report)