BSP may keep rates steady

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to keep interest rates at record low on Thursday as the near-term prospects remain worrisome for the country amid the resurgence of COVID-19 infections, according to Moody’s Analytics.

In a report, the research arm of the Moody’s Group said the Monetary Board may keep the benchmark policy rate steady at an all-time low of two percent during its rate-setting meeting on June 24.

“The near-term prospects remain worrisome for the Philippines as the country copes with an intense domestic outbreak of COVID-19, which has necessitated the extension of restrictions in the capital city and nearby provinces until the end of June,” Moody’s Analytics said.

The BSP was one of the most aggressive central banks in the world last year, slashing interest rates by 200 basis points and lowering the reserve requirement ratio for banks. In November last year, it delivered a surprise 25-basis-point interest rate cut.

Its COVID-19 response measures unleashed more than P2 trillion into the financial system.

“Although the central bank has responded to the crisis with rate cuts and substantial liquidity easing measures, it is expected to retain ammunition for now and delay further action until restrictions are eased and sectors can respond to new stimulus,” Moody’s Analytics said.

Economic managers, through the Development Budget Coordination Committee (DBCC), slashed the country’s gross domestic product (GDP) growth forecasts to a range of six to seven   percent this year and to seven to nine percent next year due to the reimposition of strict lockdown and quarantine measures in the National Capital Region and nearby provinces (NCR Plus) since March.

BSP Governor Benjamin Diokno earlier said the central bank’s accommodative monetary policy has helped bring down the cost of borrowing, ensure smooth market functioning and maintain confidence in the banking system.

“Looking ahead, the BSP will continue to focus on keeping its monetary policy stance supportive of the government’s initiatives to address the effects of the pandemic, for as long as necessary, until the economic recovery gets underway,” Diokno said.