Philippines central bank to keep a firm hand on policy leverage through Q4 22 – Reuters poll

BENGALURU: The Philippines’ central bank will wait until the end of the year before raising interest rates by a record 2.0% to support an uneven economic recovery from the COVID-19 pandemic, according to a Reuters poll .

As inflation remains subdued compared to advanced economies and the Southeast Asian nation’s growth has yet to return to pre-pandemic levels, the Bangko Sentral ng Pilipinas (BSP) will stick to its accommodating position.

All 21 economists polled in a Feb. 1-14 poll predicted the BSP would leave its benchmark rate at 2.0% at its Feb. 17 meeting.

This was in line with Governor Benjamin Diokno’s advice that monetary policy would remain accommodative for as long as needed to support growth and would not necessarily follow the US Federal Reserve, which is expected to hike rates next month.

While the last round of Fed monetary policy tightening led to large capital outflows from emerging economies, leaving local currencies considerably weaker, economists do not predict a repeat this time around.

“We do not expect any policy change from the BSP, at least for now. ‘ in the midst of a recovery,” writes Robert Carnell, regional head of research for Asia-Pacific at ING.

“However, BSP’s dovish stance amid a hawkish Fed could translate to additional pressure on the Philippine peso in the near term.”

The Philippine peso has been relatively stable this year, depreciating only about 1% against the US dollar. A Reuters poll taken early last month showed that the peso will hover around the current rate this year. [EMRG/POLL]

The central bank was to raise its policy rate to 2.50% towards the end of 2022, followed by 25 basis points in the second quarter of 2023 and another 25 basis points in the July-September quarter, taking rates to 3, 00%. .

Almost half, seven of the 15 respondents, forecast a rate hike of at least 25 basis points by the end of the third quarter, including three who said it would come as soon as April-June.

Still, most survey respondents said the central bank would be in a wait-and-see mode before shifting gears.

This cautious approach echoes the position of a few other central banks in Asia, including the Reserve Bank of India and the Bank of Thailand, which were to maintain a dovish stance rather than try to calm inflation.

(Reporting by Md. Manzer Hussain; Polling by Vivek Mishra; Editing by Chizu Nomiyama)

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