Philippine central bank seen holding policy rate at all-time low

15 Nov 2021

The central bank of the Philippines is predicted to keep the policy rate at a record low of 2% at Thursday’s Monetary Board meeting, due to the hesitant economic recovery ravaged by the coronavirus crisis.

“Despite the upside surprise in the real GDP data in the third quarter, BSP Governor (Benjamin) Diokno noted that the central bank ‘will continue to be patient’ until there is ‘clearer evidence that the economic recovery is on firmer footing,’” according to Goldman Sachs Economics Research.

Real GDP at the end of September rose by an average of 4.9% - within the 4-5% target range set by the government – following the better-than-forecast 7.1% rise during Q3.

“Food supply constraints and global energy prices remain a key risk to our forecast of headline inflation falling to 3% year-on-year by early 2022. With headline inflation returning to the BSP’s inflation target band of 2%1 to 4% in our baseline forecasts and the economy only beginning the recovery process from the COVID-19 shock as virus restrictions are eased next year, we expect the BSP to be patient in normalizing policy settings, keeping the policy rate on hold until late 2022,” Goldman Sachs went on to add.

Furthermore, in another report, Capital Economics forecasts monetary policy in the Philippines to “remain loose for some time.”

“While the economy is now rebounding, the recovery in the Philippines has a long way to go and the BSP will be in no rush to tighten. We expect rates to be left on hold on Thursday and for some time thereafter,” the London-based think tank stated.

Following the “impressive” 3.8% quarter-on-quarter growth in Q3 GDP, Capital Economics said the Philippine economy would “likely grow strongly again this quarter given the sharp fall in new virus cases and an easing of restrictions.”