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UPDATE 2-Philippine c.bank holds rates at record low, signals no change anytime soon

ForexMay 12, 2021 17:40
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© Reuters

* BSP keeps key rate at record low for fourth meeting
* C.bank sees 2021, 2022 inflation within target
* COVID-19 cases pose 'substantial downside risk'

(Adds economists' comments, President Duterte's directive)
By Neil Jerome Morales and Karen Lema
MANILA, May 12 (Reuters) - The Philippine central bank left
its key interest rate steady at a record low on Wednesday, as
policymakers focus on supporting an economy which is showing
signs of recovering after shrinking for five consecutive
quarters.
The Bangko Sentral ng Pilipinas (BSP) kept the rate on the
overnight reverse repurchase facility PHCBIR=ECI at 2.0% for a
fourth consecutive meeting, as predicted by all 13 economists in
a Reuters poll. The rates on the overnight deposit and lending facilities
were also held steady at 1.5% and 2.5%, respectively.
The BSP's decision comes on the heels of Tuesday's data
showing the economy contracted more than expected in the first
quarter, although sequential growth momentum pointed to an
emerging recovery. "On balance, the expected path of inflation and downside
risks to domestic economic growth warrant keeping monetary
policy settings steady," BSP Governor Benjamin Diokno told a
news briefing.
Diokno said the risks to the inflation outlook were broadly
balanced, with both averages for this year and next seen
settling within the 2%-4% target band.
The BSP lowered its inflation forecast for this year to
3.9%from 4.2% previously. For 2022, inflation is seen averaging
3.0%, up from the previous forecast of 2.8%.
Diokno signalled no change in policy settings anytime soon,
saying that "sustained support for domestic demand remains a
priority for monetary policy."
Despite elevated inflation mainly driven by tight pork
supply, some economists expect the BSP to stand pat for the rest
of 2021, while others have not ruled out a further easing.
"Provided inflation does begin to fall back later in the
year, then rate cuts are likely in the second half of the year,"
said Capital Economics' Asia economist Alex Holmes.
The Philippines, which suffered a record 9.6% economic
contraction last year, is battling one of Asia's worst
coronavirus outbreaks with more than a million cases recorded
and roughly 18,700 deaths. A new surge in COVID-19 cases starting in March had prompted
the reimposition of stricter mobility curbs, and Diokno warned
that infections "pose substantial downside risk to domestic
demand".
On Wednesday, President Rodrigo Duterte ordered all agencies
in the executive department to identify savings from their
budgets to augment badly-needed funds for the government's
pandemic relief measures.
A slow rollout of COVID-19 vaccinations has also raised
risks of a more prolonged period of economic weakness.
Michael Ricafort, economist at Rizal Commercial Banking
Corp, said the local economy "still needs to get all the support
measures that it can get amid limited funds for any additional
stimulus measures".



UPDATE 2-Philippine c.bank holds rates at record low, signals no change anytime soon
 

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