Philippine CB holds rates at record low
MANILA: The Philippine central bank let its key interest rate steady at a record low on Wednesday, as policymakers focus on supporting an economy which is showing signs of recovering ater shrinking for five consecutive quarters.
The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at 2.0 per cent for a fourth consecutive meeting, as predicted by all 13 economists in a Reuters poll.
The rates on the overnight deposit and lending facilities were also held steady at 1.5 per cent and 2.5 per cent, respectively.
The BSP’S decision comes on the heels of Tuesday’s data showing the economy contracted more than expected in the first quarter, although sequential growth momentum pointed to an emerging recovery.
“On balance, the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy setings steady,” BSP Governor Benjamin Diokno told a news briefing.
Diokno said the risks to the inflation outlook were broadly balanced, with both averages for this year and next seen setling within the 2 per cent -4 per cent target band.
The BSP lowered its inflation forecast for this year to 3.9 per cent from 4.2 per cent previously. For 2022, inflation is seen averaging 3.0 per cent, up from the previous forecast of 2.8 per cent.
Diokno signalled no change in policy setings anytime soon, saying that “sustained support for domestic demand remains a priority for monetary policy.”
Despite elevated inflation mainly driven by tight pork supply, some economists expect the BSP to stand pat for the rest of 2021, while others have not ruled out a further easing.
“Provided inflation does begin to fall back later in the year, then rate cuts are likely in the second half of the year,” said Capital Economics’ Asia economist Alex Holmes.