Adds analysts’ outlook, details
By Neil Jerome Morales
BORACAY, Philippines Nov 18 (Reuters) – The Philippine central bank kept its policy rate at a record low on Thursday, maintaining support for the pandemic-hit economy even as it warned of risks to inflation next year.
The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility PHCBIR=ECI at 2.0%, saying it would prioritise policy support to ensure a sustained recovery but stood ready to respond to second round effects.
“On balance, the sum of new data suggests that there remains scope to hold monetary policy settings steady amid a manageable inflation environment,” BSP Governor Benjamin Diokno said.
“Keeping a patient hand on the BSP’s policy levers, along with appropriate fiscal and health interventions, will keep the economic recovery more sustainable over the next few quarters,” he told reporters at a news conference on the resort island of Boracay.
The Philippines, which suffered one of Asia’s worst outbreaks of the pandemic, slashed its growth target this year to 4%-5% from 6%-7%.
A decline in infections has allowed for a gradual easing of curbs, with more businesses reopening and helping the recovery gain some momentum in recent months.
Annual economic growth slowed less than expected in the third quarter, putting the country on course to meet, if not exceed, its 2021 target, according to Philippines officials, including Diokno. nL4N2S5029
“A surprise pick-up in economic growth opens the door for possible adjustments down the road,” said Nicholas Mapa, a senior economist at ING, predicting a BSP rate hike as early as the second quarter of 2022.
Other economists, however, believe the BSP could keep its loose policy stance even longer.
“Barring any surprise remarks, we are sticking with our view that rates will remain on hold throughout 2022,” said Alex Holmes, Asia economist at Capital Economics.
All 19 economists surveyed by Reuters had expected the central bank to keep the benchmark rate on hold. nL4N2S218T
The central bank kept rates on its overnight deposit and lending facilities at 1.5% and 2.5%, respectively.
The government has ramped up its vaccination drive, having inoculated more than a quarter of its 110 million population, and is hoping to further relax mobility curbs early next year.
Although the risks to the inflation outlook have shifted towards the upside for 2022, Diokno said they remain broadly balanced for 2023.
(Additional reporting by Karen Lema and Enrico Dela Cruz; Editing by Jacqueline Wong)