Philippines: BSP leaves rates unchanged – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest monetary policy meeting by the BSP.

Key Takeaways

“Bangko Sentral ng Pilipinas (BSP), as expected, maintained all policy rates unchanged today (17 Feb), with the overnight reverse repurchase (RRP) rate at 2.00%, overnight deposit rate at 1.50% and overnight lending rate at 2.50%.”

“There was a slightly more hawkish tilt in today’s monetary policy statement (MPS) as compared to the Dec 2021’s statement, with changes made for the Monetary Board’s (MB) concerns about near-term inflation, positive growth outlook on the local front, and forward guidance. BSP tweaked its inflation forecasts higher to 3.7% for 2022 (from 3.4% previously: UOB est: 3.5%) and 3.3% for 2023 (from 3.2% previously; UOB est: 3.5%).”

“We see the changes in today’s MPS as a signal that the BSP is preparing markets for an earlier rate hike should conditions warrant and inflation surpasses its target range in the near term. Hence, we revise our BSP outlook to three rate hikes this year with a 25bps increase in each quarter starting from 2Q22 (vs previous est: two 25bps hike in 2H22). It is premised on an expected more aggressive Fed tightening, solid upturn in domestic growth, and rising demand price pressures in tandem with improving economic activities towards year-end. The Monetary Board will next meet on 24 Mar.”