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BSP seen to keep rates steady on Thursday meet

By: - Reporter / @bendeveraINQ
/ 05:10 AM February 04, 2019

The Bangko Sentral ng Pilipinas (BSP) is expected to keep interest rates steady at its first meeting on monetary policy for 2019 on Thursday even as rate cuts could start in May.

“The BSP is unlikely to change policy at its [Feb. 7] meeting, but we expect a more dovish statement and perhaps a hint that loosening is on its way,” London-based Capital Economics said in a Feb. 1 report titled “Philippines Policy Rate: Rates on hold, but cuts to come.”

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The Monetary Board, the BSP’s policymaking body, last year raised key rates by a total of 175 basis points due to faster-than-expected inflation.
Headline inflation hit a 10-year high of 5.2 percent in 2018 due to higher excise taxes slapped on consumption, domestic rice supply shortage and the skyrocketing global oil prices.

Capital Economics now sees easing price pressures, such that it projected the January inflation rate to further slow to 4.4 percent from 5.1 percent in December.
“With inflation likely to fall back within the BSP’s 2-4 percent target by the end of this quarter, the [central] bank is likely to start unwinding some of last year’s tightening,” it said.

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As such, Capital Economics expects a rate cut when the BSP’s Monetary Board meets on the monetary policy stance on May 7.

“The BSP is also likely to resume cutting its reserve requirement this year as part of the plan to lower the rate to the single digits. At his first meeting back after a leave of absence, Governor [Nestor] Espenilla could provide some hints as to how these reforms will proceed,” it added.

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TAGS: Bangko Sentral ng Pilipinas (BSP), Business
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