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BSP seen to keep rates at record lows
In its latest economics insights, Bank of the Philippine Islands said the Monetary Board may keep its policy rate steady in the first half to support the economy, especially at this time when the COVID infection rate is still high.
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BSP seen to keep rates at record lows

Lawrence Agcaoili (The Philippine Star) - May 9, 2021 - 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) may keep interest rates at record lows this week amid the projected slow recovery from the pandemic-induced recession and steady inflation for the month of April.

In its latest economics insights, Bank of the Philippine Islands (BPO) said the Monetary Board may keep its policy rate steady in the first half to support the economy, especially at this time when the COVID infection rate is still high.

However, the Ayala-led bank said supply constraints and elevated oil prices could eventually lead to second-round effects if these are not addressed immediately.

BPI Global Markets Economic and Financial Markets Research said the BSP may adjust its policy rates if core inflation stays above four percent in order to manage second-round effects and anchor inflation expectations.

“To help keep core inflation from consistently breaching the headline target, there may be a recalibration of the policy rate later this year for the monetary authorities in order to maintain its independence and credibility,” the bank said.

It said keeping the policy rate significantly below the inflation rate may affect financial stability and cause volatility in the markets.

Headline inflation was steady in April but remained above the two to four percent inflation target of the BSP.

Despite being steady at 4.5 percent in April, BPI believes inflation has not reached its peak and it may go up further in the coming months, at least until the third quarter.

Aboitiz-led Union Bank of the Philippines also expects the BSP to keep interest rates unchanged on Thursday as the economic recession extended to the first quarter of the year.

“We think that the steady inflation and the expected underwhelming expected 1Q GDP print are enough anchors for monetary policy to remain accommodative. BSP’s key monetary policy rates are expected to be unchanged,” UnionBank chief economist Ruben Carlo Asuncion said.

BANGKO SENTRAL NG PILIPINAS
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