MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) may hike its key policy rates for the first time in over a year this June after the presidential elections, according to London-based think tank Capital Economics.

"The upshot is that we expect a first 25 basis points hike in the overnight rate at the BSP meeting in early June. This seems more likely to us than a rate increase at the next (April) BSP monetary policy review, which is probably too close to the May elections," it said.

Last March 11, the central bank’s Monetary Board kept its benchmark policy rates steady at record low but continued unwinding liquidity measures in line with economic recovery and the uptick in inflation. It cut the budget for short-term money under a peso rediscounting facility to P40 billion from P60 billion.

By December this year, Capital Economics expects the BSP's key overnight borrowing rate to reach 5%.

The central bank has lowered its inflation forecast for 2010 to 4.6%, and revised upward the forecast for 2011 to 3.5%. The official target range for inflation this year is 3.5-5.5%.

"While food and wage pressures will probably intensify near term and will likely lift inflation to the top end of the target range, we agree with the government and believe that there is a good chance that consumer price gains will not breach the target in 2010 to 2011 as a whole," Capital Economics said.

Meanwhile, the think tank said the peso would likely appreciate to 43:$1 by year-end against the current 45.7.