Bangko Sentral seen keeping rate steady despite inflation pressures

Reuters

Posted at Feb 10 2021 03:50 PM

Bangko Sentral seen keeping rate steady despite inflation pressures 1

MANILA - The Bangko Sentral ng Pilipinas is expected to keep its benchmark interest rate steady at a record low on Thursday, shrugging off a projected uptick in inflation to support the country's pandemic-hit economy, a Reuters poll showed.

All 13 economists surveyed in the poll predicted the Bangko Sentral ng Pilipinas (BSP) will leave the rate on its overnight reverse repurchase facility unchanged at 2 percent for a second straight meeting.

"We do not see the BSP deviating from its accommodative monetary policy stance, that is, not prematurely hiking policy rate on the back of elevated headline inflation," said Kanika Bhatnagar, an economist at ANZ.

Inflation, which had been picking up since the last quarter of 2020, hit a two-year high of 4.2 percent in January, as supply constraints boosted the price of meat and vegetables. 

While the BSP has dismissed the inflation uptick as "transitory", some economists have ruled out further policy easing this year and have raised the possibility of a rate hike.

The BSP slashed rates by a cumulative 200 basis points last year, at a time when the economy suffered the worst contraction on record due to the pandemic. 

If economic indicators do not show an improvement and government spending remains lackluster in the first quarter, Bhatnagar said the BSP will likely take up the slack with another rate cut of 25 basis points at its March meeting.

(Reporting by Enrico Dela Cruz
Editing by Karen Lema and Ed Davies)

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