Philippine c.bank stays true to rates, signals recovery risks

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  • The key rate remains at 2.0%, as unanimously expected in a Reuters poll
  • BSP cites geopolitical concerns and volatile oil prices
  • Inflation in 2022 and 2023 should remain within the target

MANILA, Feb 17 (Reuters) – The Philippines’ central bank left key interest rates unchanged for a 10th consecutive policy meeting on Thursday, reaffirming continued support for the economy as officials warned of risks ahead. could derail the global recovery.

The Bangko Sentral ng Pilipinas (BSP) kept the overnight repo facility rate (PHCBIR=ECI) at a record high of 2.0%, as forecast by the 21 economists in a Reuters poll. Read more

Interest rates on deposit and overnight lending facilities were also maintained at 1.5% and 2.5%, respectively.

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“The Monetary Board considers it prudent to maintain the BSP’s accommodative policy stance given a manageable inflation environment and emerging uncertainty surrounding the domestic and global growth outlook,” BSP Governor Benjamin Diokno said during the meeting. a joint press briefing with the media and analysts.

Last week, he said the BSP would not necessarily follow the US Federal Reserve, which signaled it may start raising interest rates in March to fight inflation. Read more

BSP will wait until the end of the year before raising rates, according to a Reuters poll from Feb. 1-14, in line with Diokno’s view that monetary policy would remain accommodative for as long as needed to support growth. Read more

On Thursday, Diokno said the economy’s recovery was gaining traction, but high global commodity prices, heightened geopolitical tensions and the uneven pace of COVID-19 vaccinations from country to country could weigh on growth prospects.

Some economists, however, believe that a rise in BSP rates could come as early as the end of the second quarter.

“BSP can keep prices unchanged for now, but the accommodation window is closing fast,” ING senior economist Nicholas Mapa said, citing emerging inflationary pressures.

Increased volatility in global oil prices warrants close monitoring and potential “second-round effects” on inflation should be avoided through appropriate intervention measures, the BSP said.

The BSP forecasts average inflation of 3.7% in 2022 and 3.3% in 2023, within the target range of 2% to 4% but slightly above previous forecasts.

“There is enough room to continue an accommodative monetary policy in the short term, with possible normalization expected to start around the second half of 2022,” BSP Deputy Governor Francisco Dakila said at the same briefing.

But given what Diokno described as stronger signs of recovery in output growth and labor market conditions and improvements in domestic financial markets, he said the BSP was developing a exit strategy.

“The BSP will continue to carefully develop its plans for the eventual normalization of its extraordinary liquidity measures when conditions warrant,” he said.

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Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Martin Petty and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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