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HSBC sees Bangko Sentral rate hike as early as 4Q means BUSINESS

MANILA, Philippines - HSBC said the Bangko Sentral ng Pilipinas (BSP) may raise its key interest rates as early as the fourth quarter of this year amid rising inflation.

"The acceleration of prices is just beginning. Inflation, while still at the bottom of the BSP's three to five percent target, is set to rise from now on. The pressures are coming from the filtering through of easing measures in 1Q, secondary effects from higher oil prices as well as stronger growth," Trinh Nguyen, economist at HSBC Global Research, said in a research note released after the National Statistics Office (NSO) reported Philippine inflation figures for April.

In its report last Friday, the NSO said inflation picked up to three percent. This is the fastest increase in consumer prices since January this year.

Despite the pickup in prices, the April reading was at the low end of the BSP target range of three to five percent.

"While prices are rising (note the strong uptick of core inflation in April), they are still at the bottom of the BSP's target. Inflation will likely reach the top end of the target range by year-end, although it is unlikely to breach it. What this means is that the next move for the BSP is up rather than down," Ngyuen said.

"For now, however, inflation is still low enough for monetary officials to keep rates accommodative. Although we have called for the next hike to not come until 1Q 2013, it could come as early as the last quarter of 2012," he said.

The BSP has kept its policy rates at record lows of four percent for the overnight lending or reverse repurchase window, and six percent for the overnight borrowing or repurchase window.

BSP officials earlier said Philippine inflation would stay within its forecast range if international oil prices stay at or below $120 a barrel.