[ad_1]
MANILA – ANZ Research forecasts a further 25 basis point reduction in key Bangko Sentral ng Pilipinas (BSP) policy rates in the first quarter of next year as the economic recovery continues to face challenges.
In a report dated Dec. 17, the market and economic research provider said the uncertain economic environment has affected consumer and business confidence, hence the low transfer rate of the total 200 basis points reduction in key BSP rates this year.
This situation, he said, made the transmission of monetary policy ineffective to date.
He also noted that “despite negative real interest rates, credit growth has been weak in households and businesses.”
The BSP has reported a slowdown to 1.9 percent in loan growth from universal and commercial banks, excluding placement in the central bank’s reverse repurchase facility (RRP), last October from 2.6 percent. of the previous month.
He attributed this development to “the combined effects of subdued business confidence and the banks’ stricter lending standards primarily attributed to continued disruptions in business operations.”
ANZ Research said domestic sentiments have improved, but weak export and labor market growth and continued repatriation of Filipino Overseas Workers (OFW), which affects consumer demand, reduce opportunities for recovery.
“The economic recovery has a long way to go and therefore, in our opinion, the rate cut cycle is not over yet, with another 25bp cut likely in the first quarter of 2021,” he added.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort also anticipates potential cuts in key BSP rates next year, even with the recent spike in the national inflation rate.
He said the 21-month high inflation rate of 3.3 percent last November, which was attributed to the impact of typhoons Ulysses and Rolly on some agricultural products, makes any cuts in central bank policy rates “somewhat challenging. now”.
However, it projects that inflation will moderate from December this year to February next year to more than 2 percent.
This, he said, “could still support any further easing in the future.”
Average inflation in the first 11 months of this year stood at 2.6 percent, within the government’s target band of 2-4 percent through 2022.
The BSP has revised up its average inflation forecast for this year and next to 2.6 percent and 3.2 percent, respectively, but kept the forecast for 2022 at 2.9 percent.
The previous forecast for 2020 is 2.4 percent, while the forecast for 2021 was 2.7 percent.
“Inflation could fundamentally rebound in 2021, especially if the economic recovery picks up further, especially with any additional measures to further reopen the economy, especially if the Covid-19 (coronavirus disease 2019) vaccine is launched in 2021 which could help reduce new Covid-19 local cases (from current levels of 1,000 per day recently), higher infrastructure spending, and lower base / denominator effects beginning in March 2021 or exactly one year after the shutdowns began Covid-19 / pandemic (which would mathematically lead to a higher year over year) annual inflation rate thereafter, assuming all other factors remain the same), “he added. (PNA)
[ad_2]
