^
Rate easing cycle seen to resume in Q3
In its weekly outlook, London-based Capital Economics expressed certainty that interest rates would remain unchanged during the central bank’s policy meet this week.
BW Photo/File

Rate easing cycle seen to resume in Q3

Louise Maureen Simeon (The Philippine Star) - June 21, 2021 - 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is widely expected to keep rates steady at Thursday’s monetary policy meeting, but would likely resume its easing cycle by September, an international think tank said.

In its weekly outlook, London-based Capital Economics expressed certainty that interest rates would remain unchanged during the central bank’s policy meet this week.

However, the think tank said the BSP is likely to start loosening policy later in the year as inflation starts to ease.

“With headline inflation likely to fall back sharply in the second half of the year and a strong recovery in the economy still some way off, we expect BSP to resume its easing cycle soon, probably at its meeting on Sept. 23rd,” economist Alex Holmes said.

Based on its forecast, Capital Economics said the BSP would cut interest rates by 25 basis points in the third quarter.

Holmes maintained that BSP would stay in a wait-and-see mode at Thursday’s meeting although he expects more dovish signals from the Monetary Board.

“The BSP Governor has stressed the need to keep policy accommodative and the economy is in need of more support,” Holmes said.

“Although daily cases of COVID-19 are well below their April peak, the situation remains dire. Our mobility tracker suggests that restrictions and social distancing remain a major drag on activity,” he said.

The BSP has been keeping interest rates at record lows for the past six months as it aids the economy to recover following a record 9.6 percent economic slump last year.

But inflation remained at 4.5 percent for a third month in May as the uptick in transport and fuel and meat prices was offset by the decline in other food commodities.

For full year 2021, Capital Economics sees inflation settling at 3.7 percent, falling within the two to four percent target of the BSP.

However, BSP Governor Benjamin Diokno already said the central bank was likely to keep “this loose monetary policy until such time that we are sure that the government is on its way to recovery, a sustainable recovery.”

It was in November 2020 when the BSP last adjusted interest rates with a surprise 25-basis-point rate cut.

BANGKO SENTRAL NG PILIPINAS
Philstar
  • Latest
  • Trending
Latest
Are you sure you want to log out?
X
Login

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

FORGOT PASSWORD?
SIGN IN
or sign in with