Philippines: BSP shifts to a patient stance, left rates unchanged – UOB

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

Key Takeaways

“Bangko Sentral ng Pilipinas (BSP) unsurprisingly left the overnight reverse repurchase (RRP) rate unchanged at 2.00% today (18 Nov) for an eighth consecutive meeting. Both the overnight deposit and lending rates were also kept steady at 1.50% and 2.50% respectively. The central bank cited that a manageable inflation environment and nascent economic recovery provided scope to hold monetary policy settings steady.”

“Also, for the first time, BSP officially emphasised its patience on rates in today’s monetary policy statement (MPS)... Although there are signs of improving growth momentum in the country following the gradual relaxation of mobility curbs and increasing vaccination rates, downside risks still linger, predominantly coming from the emergence of more virulent COVID-19 variants which could delay the lifting of domestic containment measures, and prolonged impact of global supply chain bottlenecks.”

“In sum, the overall tone of both the MPS and press briefing…remain centered on a sustainable growth path and elevated inflationary pressures.”

“Hence, we continue to expect a steady RRP rate of 2.00% until mid-2022. Thereafter, we anticipate a 25bps rate hike in 3Q22 that will bring the RRP rate to 2.25% by end-2022.”