Bangko Sentral expected to hold rates despite Q3 GDP slide

Enrico Dela Cruz, Reuters

Posted at Nov 19 2020 09:58 AM

Bangko Sentral expected to hold rates despite Q3 GDP slide 1
Bangko Sentral ng Pilipinas Headquarters in Manila. Jonathan Cellona, ABS-CBN News

MANILA - The Philippine central bank is expected to hold interest rates steady on Thursday, with liquidity in the economy still ample and despite a deeper-than-expected contraction in third-quarter gross domestic product, a Reuters poll found. 
 
Nine of the 11 economists surveyed predicted the Bangko Sentral ng Pilipinas (BSP) will leave the interest rate on its overnight reverse repurchase facility unchanged at a record low of 2.25 percent for a third straight meeting on Nov. 19. 
 
Two economists forecast a 25-basis point rate cut, which would be the fifth this year, after the BSP slashed rates by a cumulative 175 bps reduction between February and June to resuscitate the coronavirus-hit economy.
 
Despite the unprecedented monetary policy support, including reductions in banks' reserve requirements, the economy shrank by more than expected in the third quarter on an annual basis, hit by weak demand and a slowdown in government spending.
 
What the economy needs is "a more forceful" fiscal support, said Nicholas Mapa, ING's senior economist for the Philippines.
 
While not forecasting a rate cut on balance, Mapa does not completely rule out further easing either through a cut in reserve requirements or the policy rate on Thursday. 
 
The BSP has one more policy review before the year ends, slated for Dec. 17.

HSBC economist Noelan Arbis said he did not expect the central bank to do more for the rest of the year, given "the absence of a big-ticket stimulus from the government". 

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