No signs BSP will raise rates in near term: Moody's Analytics


Posted at Oct 21 2021 11:08 AM

MANILA— The Bangko Sentral ng Pilipinas is unlikely to tighten interest rates in the near term as the country still struggles to recover from the impact of the COVID-19 pandemic, an economist from Moody's Analytics said Thursday.

The BSP has kept the benchmark interest rates steady at 2 percent for 7 consecutive meetings.

"My guess is, with the Philippine economy still struggling to recover, I don’t think there is any indication near term that the central bank of the Philippines will raise rates soon," Moody’s Analytics Chief APAC economist Steve Cochrane told ANC. 

"I think they will remain accommodative, allow the economy to get back on speed even if inflation stays persistently above 4 percent," he added.

This is in line with BSP Governor Benjamin Diokno's earlier statement that the monetary board is unlikely to adjust interest rates for the remaining 2 consecutive meetings for the rest of the year.

Diokno said the uptick in inflation is "transitory" despite the monthly average consistently breaching the top band of the government's 2 to 4 percent target range for the past few months.

Inflation in September hit 4.8 percent

Cochrane said he expected a "modest path" in terms of normalizing interest rates in the region.

As to pandemic response, the easing of restrictions in the region is also likely to boost domestic demand and contribute to economic growth

He said the potential negative impact of another surge or a new COVID-19 variant would be different next time since vaccination rates are rising and policymakers are learning to deal with the pandemic without completely locking down the economy.