The Bangko Sentral ng Pilipinas (BSP) is likely to keep interest rates unchanged during its first rate-setting meeting this year scheduled on Thursday, according to Moody’s researchers.
Moody’s Analytics notes the policy-making Monetary Board will likely keep its accommodative monetary policy stance as economic recovery is only beginning to recover.
“The Philippine central bank is expected to stand pat on monetary policy when it meets, leaving the benchmark policy rate at two percent,” Moody’s Analytics said.
Various analysts note the BSP was one of the most aggressive central banks in 2020 when it slashed interest rates by 200 basis points and brought the benchmark rate to an all-time low of two percent to cushion the debilitating impact of the COVID-19 pandemic on the economy.
Interest rates were also unchanged for more than a year since the surprise 25 basis points cut in November 2020.
The BSP said the government’s COVID-19 response measures released P2.3 trillion into the financial system to help boost economic activity. This was apart from the scaled back reserve requirement ratio, the P540 billion non-interest bearing loan extended to the national government and the purchase of government securities in the secondary market.
But the BSP may no longer pursue its accommodative policy stance in the second half of the year as the economy recovers from the recession induced by the pandemic.
There is also the hawkish stance of the US Federal Reserve that makes this scenario more likely, the BSP said.