BSP to keep rates steady
The Bangko Sentral ng Pilipinas (BSP) is expected to keep key interest rates steady when its policymaking Monetary Board meets to tackle monetary policy next week, although easing inflation will allow a cut by May, according to London-based Capital Economics.
“An early rate cut in the Philippines is looking increasingly likely after the country’s new central bank governor, Benjamin Diokno, told a news conference on Friday that ‘given the decelerating inflation in the Philippines, there is an opportunity for monetary easing,”’ Capital Economics senior Asia economist Gareth Leather and Asia economist Alex Holmes said in a March 8 report.
“The key question now is how soon rates will be cut. Diokno also mentioned in his press conference that easing ‘would be data dependent.’ The central bank’s next meeting is on March 21 and with no significant data due between now and then, a rate cut this month is unlikely,” the report read.
“But if inflation continues to fall back as we expect, an interest rate cut in May is looking increasingly likely,” it added.
In an earlier March 7 report, Holmes said they expected inflation in the Philippines this year “to be at or below the central bank midpoint target” or 3 percent and below.
The Cabinet-level, interagency Development Budget Coordination Committee (DBCC) earlier decided to keep the 2-4 percent yearly inflation target from 2019 to 2022.
“Inflation in the country has fallen back sharply since October and is likely to decline further over the coming months, giving the central bank room to start unwinding some of last year’s 175 basis points in rate hikes,” Holmes said.
Headline inflation averaged a 10-year high of 5.2 percent in 2018 amid shortages in the supply of food, especially rice, skyrocketing global oil prices and higher excise taxes slapped on consumption.
The rate of increase in prices of basic commodities nonetheless slowed for the fourth straight month in February, with the rate declining to a 12-month low of 3.8 percent year-on-year mainly on easing food prices.
