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After cutting the policy rate by a cumulative 200 basis points (bp) to a record low of 2 percent this year to keep the economy afloat amid the COVID-19 pandemic, the Bangko Sentral is expected to ng Pilipinas (BSP) will stop further easing during their last monetary policy meeting this year.
“We hope that the BSP remains on hold at the next meeting of the Monetary Board [on Thursday, Dec. 17], and we have no further rate cuts in our base case in 2021. This is because we believe the economy has already started to recover and GDP (gross domestic product) growth will likely accelerate above trend in 2021 in vaccine availability, low baseline effects and accommodative policies, ”Morgan Stanley Research said in a December 9 report.
Economic managers expect GDP to shrink 8.5-9.5 percent this year before bouncing back to 6.5-7.5 percent growth next year.
“We believe that manageable inflation and abundant liquidity provided by the Fed [US Federal Reserve] The average inflation targeting framework means that the BSP will likely continue to maintain the accommodative policy rate at current levels in 2021. In fact, RRR (mandatory reserve ratio) cuts are still likely as a potential tool, as the Policymakers have commented that the RRR is still relatively high relative to its peers and there is room to reduce this, possibly to single digit territory by 2023, ”said Morgan Stanley Research.
In a Dec. 9 report, ING’s chief economist for Asia Prakash Sakpal also expected the BSP to leave rates unchanged.
“In the Philippines, the latest CPI (consumer price index) rally to a 20-month high of 3.3 percent year-on-year in November from 2.5 percent in October has pushed central bank policy bears out of the game.” Sakpal said. .
Capital Economics senior economist for Asia Gareth Leather said in a report that “while we expect a pause in December, further relaxation is likely next year.”
“An increase in headline inflation last month is likely to discourage the [BSP] to make consecutive cuts, ”he said, referring to the surprise 25 bp cut in November. INQ
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