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The Bangko Sentral ng Pilipinas (BSP) is expected to keep the benchmark rate unchanged when it meets on November 19, the second of its last two Monetary Board policy meetings of the year.
Analysts at ING Bank, HSBC and Union Bank of the Philippines said the Monetary Board will not move the policy rate in November and December.
ING Bank economist Nicholas Mapa said the BSP will likely continue its hold position given that the economy is in recession and inflation is within the government’s target of two to four percent at 2.5 percent by the end of April. October.
BSP Governor Benjamin E. Diokno noted that he has “reiterated that it will probably keep monetary policy rates intact over the next two quarters with real policy rates now negative (-0.25 percent) and after implement a series of aggressive rate cuts in 2020. “
Mapa said that for ING, inflation is expected to settle at 2.4 percent in 2020 with “anemic” domestic demand that will control price gains and with “BSP is content to provide liquidity support through its purchase program. bond to help stimulate recovery. ”
HSBC Global Research said the BSP is likely to keep its policy rate unchanged throughout 2020 and they expect a 25 basis point (bp) cut to a fixed two percent in the first quarter of 2021 from its current 2.25 percent. percent as mobility restrictions are further loosened and BSP seeks to provide a growth boost. “
“We expect the BSP to keep its policy rate stable for the rest of 2020. Interest rates are already at record lows and the economy is still in the early stages of a recovery,” HSBC said.
The British bank pointed to some things that would affect the recovery, such as how quickly the government will revitalize economic activity while there are still concerns about local mobility data that it said are among the weakest in the region.
“Bank loan growth also continues to decline, despite low interest rates and ample liquidity in the market, suggesting that corporate and individual borrowers remain cautious about adding leverage given the economic uncertainties in course. This means that containing the virus nationwide and reopening the economy are likely to be prerequisites before further rate cuts lead to a pick-up in loan growth, ”HSBC said.
Meanwhile, analysts at Union Bank of the Philippines said that with unchanged industry loan and asset growth forecast for this year due to the pandemic, and with the weak economy and slower credit demand, they also see the BSP is not doing any more moves to lower the reverse repurchase rate (RRP) and the reserve requirement rate (RRR).
“The bank expects the RRP and RRR rate of the BSP to remain unchanged this year to give the economy some time to absorb the excess liquidity released earlier this year,” UnionBank said. The benchmark rate or RRP and RRR is at 2.25 percent and 14 percent respectively, after the BSP reduced it by 175 bps and 200 bps.
In a statement Thursday, the BSP said the next policy stance will take into account October’s inflation results of 2.5 percent, which is up from 2.3 percent in September. Another indicator you will consider is third quarter GDP data in your assessment of the outlook for inflation and economic activity.
October inflation is within the BSP forecast for the month of 1.9 percent to 2.7 percent.
“The balance of risks continues to decline due in large part to the impact of national and global economic activity from possible deeper economic shocks caused by the coronavirus pandemic,” said the BSP.
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