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THE CENTRAL BANK kept its benchmark interest rate at a record low on Thursday to support the Philippine economy’s recovery from the coronavirus pandemic.
The Governor of the Central Bank of the Philippines (BSP), Benjamin E. Diokno, also said inFloridaThe share is likely to remain elevated but manageable for the next several months.
In its first policy setup for the year, the Monetary Board kept the overnight reverse repurchase rate at a historic low of 2%. Likewise, credit and deposit facilities remained at 2.5% and 1.5%, respectively.
“The balance of risks for theFloridaThe outlook for the stock now appears to be broadly balanced around the baseline trajectory in 2021, but is seen to continue to tilt downward in 2022, ”Diokno said in an online summary.to beof.
“A reduced supply of meat products due in part to the outbreak of African swine fever in the country could create further upward pressure on inflation,” he added.
TO Business world The poll showed that 17 out of 18 analysts expected the Monetary Board to not change policy settings at Thursday’s meeting.
Headline inflation hit a two-year high at 4.2% in January as meat and vegetable prices soared due to tight supplies.
INFLATION OUTLOOK
Meanwhile, the BSP raised its average inflation forecast to the year at 4%, the upper limit of its 2-4% target range, up from 3.2% previously.
The central bank also lowered its inflation forecast for next year to 2.7% from the previous 2.9%, BSP deputy governor Francisco G. Dakila said at the same briefing.
“Ultimately, the Monetary Board is of the opinion that the manageable inflation outlook continues to allow the BSP to maintain an accommodative policy stance and therefore complement crucial fiscal policy measures to support economic activity and market confidence.” Diokno said.
The BSP also raised its forecast for average Dubai crude oil prices for 2021 and 2022 to $ 54.65 (from $ 47.57) and $ 51.98 ($ 47.44) per barrel, respectively.
“We know the factor driving the recovery in oil prices, that as the world economy gains momentum, we are able to cope with the pandemic and restrictions are further relaxed, there will be a recovery in oil demand.” Mr Dakila said.
Avoiding a knee-jerk reaction to raise rates was the “optimal decision at this point,” allowing BSP to support growth, ING Bank NV Manila senior economist Nicholas Antonio T. Mapa said in a note.
“BSP officials are aware of the evils of high inflation, but are also fully aware that any rate hike would have little or no impact on the price of pork or vegetables, the two main sources of infringement. “, He said.
Mr. Mapa said he expects the central bank to take policy action after the second round is over.ffects of inFloridaaction becomes apparent.
“We expect BSP to maintain its accommodative stance in the medium term to support the recovery and we only consider a reversal in case of second-round effects,” he added.
Alex Holmes, an economist at Capital Economics, said the pause will only be momentary and there will be more flexibilities on the table by the end of the year.
“The rise in inflation should be temporary, a point highlighted by the BSP at Thursday’s meeting. Inflation in fuel and transportation prices will start to recede in the second quarter, while upward pressure on food prices from the disruption caused by typhoons late last year should subside, ”he added.
The BSP cut rates by 200 basis points accumulated last year, at a time when the economy experienced its worst contraction on record due to the pandemic.
Despite an unprecedented easing policy by the BSP that included the massive purchase of government securities, banks have been risk averse in granting loans.
Bank loans fell to befor the first time in more than 14 years in December, reflecting weak consumer and business activity.
The next policy meeting of the Monetary Board is scheduled for March 25. LWT Noble with Reuters
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