BSP likely to keep interest unchanged in Feb to fuel economic recovery: analyst

ABS-CBN News

Posted at Feb 17 2022 11:03 AM | Updated as of Feb 17 2022 11:56 AM

MANILA - The BSP is likely to keep the interest rate unchanged on Thursday to support economic recovery but it could raise rates by 25 basis points before December 2022, BDO Unibank chief market strategist Jonas Ravelas said.

The BSP will hold a monetary policy meeting on Thursday afternoon.

The central bank has kept the benchmark borrowing rate at its record low of 2 percent in 2021 as the economic recovery gains pace. 

In 2021, the gross domestic product (GDP) grew 5.6 percent, slightly overshooting the government target of 5 to 5.5 percent.

“We need to ensure that this recovery continues so we need to be able to have low interest rates,” Ravelas said. 

But the BSP would also focus on commodity prices such as crude oil and pump oil, among others, Ravelas said. 

February to June will be "critical" for inflation which is seen to settle between 3.2 percent to 4.2 percent, he said.

But if inflation remained at around 4.2 percent "the central bank has a lot of space to probably still keep key rates unchanged until the first half of the year," Ravelas said.

Inflation of higher than 4.2 percent could prompt 2 hikes, he added.

Ravelas said a 25-basis point hike is expected before December 2022.

Inflation in January settled at 3 percent using 2018 as the base year.

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