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Philippines: BSP seen keeping rates steady
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is seen maintaining an accommodative stance to help rejuvenate the economy amid a surge in COVID-19 infections, according to Fitch Solutions and Moody’s Analytics.
In its latest commentary, Fitch Solutions Country Risk & Industry Research said the central bank’s Monetary Board is likely to keep its key policy rate on hold at an all-time low of two percent through 2021 instead of its earlier 25 basis points rate hike as the Philippines continues to grapple with the COVID-19 pandemic.
“We now expect the BSP to keep its key policy rate on hold at two percent through 2021, revising down our expectation for a 25 basis point rate hike,” Fitch Solutions said.
The BSP emerged as the most aggressive among the central banks in the world last year after slashing interest rates by 200 basis points and lowering the reserve requirement ratio.
Its COVID-19 response measures, including the P300-billion repurchase agreement with the Bureau of the Treasury, the P540 billion provisional advance to the national government, and the purchase of government securities in the secondary market released P2 trillion into the financial system.
“The BSP will look to the slow domestic recovery as reason to keep monetary policy accommodative, particularly with uncertainty around the pandemic still high,” Fitch Solutions said.
The central bank has maintained a low interest rate regime after delivering a surprise 25 basis points rate cut last Nov. 19 as inflation continued to quicken due to supply-side shocks caused by weather-related disturbances and the African swine fever (ASF) on food prices, as well as higher oil prices.
Inflation accelerated for the fifth straight month to a fresh two-year high of 4.7 percent in February from 4.2 percent in January, prompting the BSP’s Monetary Board to raise its inflation forecasts to 4.2 instead of four percent this year and to 2.8 instead of 2.7 percent next year.
Source: https://www.philstar.com/business/2021/03/30/2087845/bsp-seen-keeping-rates-steady