UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the latest monetary policy meeting by the central bank of the Philippines (BSP).
Key Quotes
“Bangko Sentral ng Pilipinas (BSP) decided to resume its rate cut today (19 Nov) as the resurgence of COVID-19 infections globally, muted business and household sentiment, and natural calamities at home could pose strong headwinds to the recovery of the domestic economy in the coming months. The overnight reverse repurchase (RRP) rate was cut by 25bps to a new low of 2.00% after being left untouched over the past two meetings. Both the overnight lending and deposit rates were also reduced in tandem to 2.50% and 1.50% respectively.”
“Today’s rate decision came against our estimate and Bloomberg consensus of a status quo. It also came after the 3Q20 real GDP contracted at a steeper-than-expected pace by -11.5% y/y as well as three strong typhoons (Quinta, Rolly, and Ulysses) in the past weeks have damaged about PHP25bn of infrastructure and farm output in the main Luzon island, which makes up 70% of the economy. These natural calamities will likely worsen the nation’s 2020 GDP contraction by 0.15% pts, prompting the Monetary Board (MB) to reckon that there remains a critical need for continuity policy support measures to bolster economic activity and boost market confidence.”
“During the press briefing, BSP Deputy Governor Francisco G. Dakila said growth prospects continue to hinge on when can the pandemic be resolved including the development of vaccines and enhancement of public health system, as well as how do households adjust to postpandemic environment. At this juncture, the central bank expects the economy to further gain on a seasonally adjustment quarter-on-quarter basis in 4Q20 and stage a strong rebound in 2021 (UOB forecasts: -9.5% for 2020 and +7.0% for 2021).”
“The BSP also tweaked its 2020 full-year inflation forecast up slightly to 2.4% (from 2.3% previously; UOB forecast: 2.5%), largely reflecting higher-than-expected actual inflation readings in Sep-Oct… However, the central bank revised downward its 2021 and 2022 full-year inflation projections to 2.7% and 2.9% respectively (from 2.8% and 3.0% previously; UOB forecast for 2021: 2.5%) due to expectations of slower domestic economic activity, lower global crude oil prices, and continued appreciation in the local currency (Peso, PHP).”
“Overall, the MB drew a dovish bias stance in today’s monetary policy statement as compared to that of in Oct… Notwithstanding, we expect BSP to hold rates steady next month (on 17 Dec, the last meeting of the year) and through 2021, counting on the assumptions of the availability of COVID-19 vaccines by 1H21, the enactment of larger national budget worth PHP4.506tr for 2021 by year-end, negative real interest rate through 2021, and narrowing interest rate differentials with other central banks. Fiscal support is deemed more effective in revitalising growth from the health crisis as compared to monetary policy.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.