Thailand
Philippines: BSP caps 2021 with rates steady at record-low
MANILA, Philippines — The Bangko Sentral ng Pilipinas capped the year with policy rates kept at historic-low, citing the need to continue its support to an economy that is just getting its groove back following a pandemic-induced collapse.
At its final meeting this year on Thursday, the seven-man Monetary Board decided to maintain the BSP’s overnight reverse repurchase facility at 2%, and rates on the overnight deposit and lending facilities at 1.5% and 2.5%, respectively.
As it is, the central bank left interest rates unmoved for the entire 2021. The key rate has been steady since November 2020 when the BSP ended an aggressive easing cycle meant to stimulate credit growth in the country’s pandemic-stricken economy. The effects of the BSP’s maneuvering was finally felt by the economy after bank lending broke eight straight months of contraction in August.
But higher-than-anticipated inflation print in November coupled with supply-side pressure of key food items and calls for public transport fare hikes prompted the BSP to raise its inflation forecasts. The central bank now projects inflation to yield an average 4.4% in 2021, up from 4.3% previously, and 3.4% in 2022, from the 3.3% predicted in the last Monetary Board meeting.
Outlook for inflation in 2023 was unchanged at 3.2%.
“Inflation expectations also continue to be anchored to the target level. The risks to the inflation outlook also continue to lean towards the upside for 2022 while remaining broadly balanced for 2023,” the BSP said.
For Gareth Leather, senior Asia economist for Capital Economics, the BSP’s decision came as no surprise owing to the economy’s perceived weaknesses. Earlier this week, economic officials upgraded their growth target for this year to 5-5.5% from their old forecast of 4-5% after growth “surprised on the upside” in the third quarter.
“With inflation falling and the economy still well below its pre-crisis level, the BSP is likely to keep monetary policy loose for the foreseeable future,” Leather said in an e-mailed commentary.
“While the economy is now rebounding following an easing of restrictions and a sharp fall in virus cases, it remains very weak. GDP in the third quarter was around 6% smaller than its pre-crisis level,” he added.
Source: https://www.philstar.com/business/2021/12/16/2148418/bsp-caps-2021-rates-steady-record-low