Deutsche sees BSP keep­ing pol­icy rates till ’21

BusinessMirror - - Front Page - By Ty­rone Jasper C. Piad

THE Bangko Sen­tral ng Pilip­inas (BSP) is likely to keep key pol­icy rates at the same level un­til next year, ac­cord­ing to a study. The Deutsche Bank re­search noted in a re­port on Mon­day that the Cen­tral Bank is not seen chang­ing its pol­icy stance un­til the third quar­ter of 2021.

Cur­rently, the overnight re­verse re­pur­chase fa­cil­ity is at 2.25 per­cent af­ter the Mone­tary Board (MB) im­ple­mented a se­ries of pol­icy cuts—to­tal­ing 175 ba­sis points—to in­ject liq­uid­ity into the weak­en­ing econ­omy. Overnight de­posit and overnight lend­ing rates, mean­while, stood at 1.75 per­cent and 2.75 per­cent, re­spec­tively.

The BSP had been trim­ming in­ter­est rates since the be­gin­ning of the year to aid the mar­ket, but changed its tune dur­ing the Au­gust mone­tary pol­icy meet­ing. It took a “pru­dent pause” last month from re­leas­ing liq­uid­ity as the in­fla­tion is seen set­tling within the gov­ern­ment tar­get band of 2.04.0 per­cent un­til 2022.

The Ger­man multi­na­tional in­vest­ment bank, in an ear­lier re­port, said it ex­pected the BSP to bring down in­ter­est rates to 2.25 per­cent as the Covid-19 pan­demic slows down the econ­omy.

“With the econ­omy con­tract­ing much more than the gov­ern­ment ex­pected, and in­fla­tion at the bot­tom of the Cen­tral Bank’s tar­get band—and the cur­rency strength­en­ing— we think there is still more room for BSP to cut rates,” the bank said in June. At the time, key pol­icy rates stood at 2.75 per­cent. Deutsche, mean­while, ob­served that the Philip­pines is strug­gling to con­tain the coro­n­avirus de­spite plac­ing lock­down mea­sures.

Still, the fi­nan­cial services firm noted that the coun­try has been eas­ing the mo­bil­ity re­stric­tion to help pump the lo­cal econ­omy.

“How­ever, the tol­er­ance for ex­tended rig­or­ous so­cial dis­tanc­ing ap­pears to be weak­en­ing, with new so­cial-dis­tanc­ing reg­u­la­tions be­ing in most places milder and im­posed for shorter du­ra­tions,” the bank said.

“In­dia, like In­done­sia and the Philip­pines, has yet to get the out­break un­der con­trol but pushed ahead with eas­ing of lock­down mea­sures none­the­less, al­low­ing for a re­cov­ery of eco­nomic ac­tiv­ity,” it added.

Metro Manila and other ar­eas were re­cently placed un­der the more re­laxed

gen­eral com­mu­nity quar­an­tine for one month.

This is to help the econ­omy by less­en­ing dis­rup­tions in busi­ness ac­tiv­i­ties. Still, pro­to­cols on so­cial dis­tanc­ing and other safety guide­lines are be­ing fol­lowed to avoid fur­ther rise in Covid-19 cases.

“In In­dia, In­done­sia and the Philip­pines, so­cial-dis­tanc­ing re­stric­tions were lifted be­fore the Covid-19 out­breaks had been at all con­tained—the eco­nomic cost was prov­ing too great to bear—and new in­fec­tions have, pre­dictably risen faster,” Deutsche said.

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