Philippines: BSP keeps the status quo unchanged – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the latest BSP event.

Key Quotes

“As expected, Bangko Sentral ng Pilipinas (BSP) kept its overnight reverse repurchase (RRP) rate unchanged at 2.00% today (24 Jun) for the fifth straight meeting. Likewise, both the overnight deposit and lending rates were also left untouched at 1.50% and 2.50% respectively. The decision was made as the expected path of inflation and downside risks to domestic economic growth warrant a continuation of accommodative monetary policy in the near term.”

“Despite the balance of risks to price stability, BSP tweaked slightly its 2021 full-year headline inflation forecast to an average of 4.0% (from 3.9% previously; UOB forecast: 4.0%), maintained its 3.0% inflation rate forecast for 2022 (UOB forecast: 3.0%), and introduced a 3.0% inflation projection for 2023.”

“Regarding growth prospects, the Monetary Board observed that economic activity has improved in recent weeks, but the overall momentum of the economic recovery remains vulnerable to the ongoing threat of more contagious COVID-19 virus variants and infections. The continued implementation of targeted fiscal stimulus measures, the acceleration of the national vaccination program, and persistent monetary policy support are expected to help boost market confidence and domestic economic recovery in the coming months.”

“Overall, the latest monetary policy statement is deemed neutral with the tone largely unchanged compared to May’s statement. BSP continued to affirm its support to the economy for as long as necessary to ensure its strong and sustainable recovery… As such, we maintain our view that the RRP rate will be kept at 2.00% for the rest of 2021.”

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