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Philippine central bank set to keep key rate at record low on Thursday

  • Some economists also believe the BSP will keep interest rates steady for the rest of the year.
Published June 22, 2021

MANILA: The Philippine central bank is expected to leave its benchmark interest rate at a record low on Thursday for a fifth straight policy meeting, amid efforts to underpin a swift economic recovery, a Reuters poll showed.

All 11 economists surveyed predicted the Bangko Sentral ng Pilipinas (BSP) will keep the rate on its overnight reverse repurchase facility at 2.0%.

The poll comes after BSP Governor Benjamin Diokno's recently said monetary policy would remain accommodative as long as necessary, brushing aside for now any implications if the US Federal Reserve opts for policy tightening.

A resurgence in COVID-19 infections in some parts of the Philippines also underlined a need to ensure policy support for an economy hit hard by mobility restrictions, even as new daily cases in the capital region have plateaued.

"The good news is that inflationary pressures have waned, reducing the burden on the BSP to tighten monetary policy ahead of schedule to curb runaway prices," said Noelan Arbis, an economist at HSBC.

The BSP expects inflation, which averaged 4.4% in the first five months of the year, to return to within its 2%-4% target band by the second half of the year.

Some economists also believe the BSP will keep interest rates steady for the rest of the year.

"We believe that current policy settings are accommodative enough, while the need to potentially reduce accommodation has dissipated," Arbis said.

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