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Philippines: Further inflation slowdown to keep policy rate steady
MANILA, Philippines — The latest cooling of inflation in the country will cement moves by the central bank to retain its accommodative monetary policy stance for the rest of 2022.
International think tanks said the Bangko Sentral ng Pilipinas (BSP) would keep interest rates low to support economic recovery as inflationary pressures continue to ease sharply.
Inflation slowed down for the third straight month to 4.2 percent in November on cheaper food items.
Senior Asia economist Gareth Leather of Capital Economics said there are clear signs that inflation will decline further as the new year enters.
Food inflation has been easing with additional pork imports and hog repopulation, while a bumper rice harvest is seen to boost supply and weigh on prices.
Oil prices are also expected to drop sharply as low base is out of the comparison.
“The weakness of inflation means the central bank has the room to keep interest rates low for an extended period,” Leather said.
“We expect rates to be left unchanged, not just at the BSP’s next meeting on Dec. 16 but throughout 2022 as well,” he said.
Sian Fenner of Oxford Economics echoed the same sentiment, saying Southeast Asian central banks will be in no hurry to raise rates, with gross domestic product growth still between four and six percent below pre-pandemic levels.
Fenner said inflation for 2022 will remain below central banks’ medium-term inflation targets, giving them the room to prioritize supporting their recoveries.
“We expect Malaysia, Thailand and the Philippines to remain on the sidelines until the first quarter of 2023,” Fenner said.
“Economic and labor market slack will remain significant, as the economic cost of restrictions and COVID-related disruptions will take time to unwind,” she said.
Source: https://www.philstar.com/business/2021/12/09/2146617/further-inflation-slowdown-keep-policy-rate-steady