imageMANILA: The Philippine central bank is expected to leave interest rates on hold on Thursday and to keep policy largely unchanged until after the Federal Reserve increases US rates.

Between July and September, the Bangko Sentral ng Pilipinas raised the overnight borrowing rate by 50 basis points to 4.0 percent.

All 12 economists in a Reuters poll see another hold at Thursday's first policy meeting of 2015, especially after a inflation slowed for a fifth straight month in January and there was stronger-than-expected growth in the last quarter of 2014.

The economists also expect the special deposit account rate (SDA) will be maintained at 2.5 percent, where it too has been since September.

Economists have abandoned their earlier expectations for a second quarter rate hike as cheaper food and fuel costs have given authorities greater flexibility in setting monetary policy. They now see rates rising in the second half, or in 2016, depending on when the Fed starts raising US levels.

“The BSP is likely to remain steady at least up to September, but that all depends on the US Fed's guidance," said Jose Mario Cuyegkeng, an economist at ING in Manila.

Annual inflation in January hit a 17-month low of 2.4 percent, well within the central bank's 2-4 percent target range, while economic growth surged to 6.9 percent in the last quarter of 2014.

Solid US jobs data in January renewed expectations of a mid-year interest rate increase from the Federal Reserve.

To Cuyegkeng, the BSP's current concern remains “guarding against volatility that could result from spikes in commodity prices or normalization of US monetary policy".

If the Fed's guidance is aggressive, “then the BSP will see the exchange rate so volatile that they may have to act earlier," he said.

BSP Governor Amando Tetangco has repeatedly said that authorities were ready to act to manage volatility in the financial markets even as he reaffirmed there was no urgency to alter its policy stance, with inflation forecast to stay within target.

Copyright Reuters, 2015