Philippines: BSP remained on hold last week – UOB

Julia Goh, Senior Economist at UOB Group, and Economist Loke Siew Ting, reviews the latest BSP event.

Key Takeaways

“As expected, Bangko Sentral ng Pilipinas (BSP) continued to retain its accommodative monetary policy stance…  The central bank kept the overnight reverse repurchase rate unchanged at 2.00% for the seventh straight meeting. Likewise, both the overnight deposit rate and lending rate were also left untouched at 1.50% and 2.50% respectively.”

“In today’s monetary policy statement (MPS), the Monetary Board (MB) acknowledged upside risks to the nation’s inflation outlook over the next few months… BSP projects the nation’s headline inflation to stay above its 2.0%-4.0% target range and hover near 5% levels up to Oct, before tapering off towards the upper bound of its target range from Nov onwards and back within target range in 2022-2023.”

“Regarding the growth prospects, BSP continued to stress that the recovery will still hinge on timely measures to prevent deeper negative effects on the Philippine economy. The acceleration of the government’s vaccination program and a recalibration of existing quarantine protocols will be crucial in upholding economic activity while safeguarding public health and welfare.”

“Also, the latest MPS did not signal any potential rate change in either direction even though the US Fed has effectively issued the much-awaited tapering signal and a more aggressive rate hike timeline starting 2022 (details in link). Hence, we stick to our view that BSP will remain on hold until mid-2022.”