All 24 economists polled between June 13 and 19 forecast the BSP will hold its benchmark overnight borrowing rate at 6.25%. — Reuters
MANILA: The Philippine central bank will leave its key interest rate unchanged at 6.25% for a second straight meeting tomorrow and the remainder of the year as price pressures ease, a Reuters poll of economists shows.
Inflation has steadily decreased from a 14-year peak in January and slowed for the fourth straight month in May to 6.1%, although still well above the 2% to 4% target range.
Bangko Sentral ng Pilipinas (BSP) governor Felipe Medalla said on Monday that expectations inflation will fall below 4% before year-end is “a good reason to pause”.
All 24 economists polled between June 13 and 19 forecast the BSP will hold its benchmark overnight borrowing rate at 6.25% at its policy meeting tomorrow.
A strong majority of respondents, 14 of 17, forecast rates will stay at 6.25% for the rest of the year with the remaining three predicting a rate cut by the end of 2023.
The central bank, which had previously closely followed the US Federal Reserve (Fed) in hiking interest rates, is now charting a distinct course.
BSP deputy governor Francisco Dakila Jr said last Thursday it may not move in complete lock-step with the Fed if domestic inflation warrants a different response.
“What the BSP will be affected by is the fact that they will not start cutting earlier if the Fed remains hawkish,” said Shreya Sodhani, a regional economist at Barclays.
“In later meetings if the Fed hikes, the BSP is likely to stay on hold. But when the Fed starts cutting, that’s when the BSP will start to again replicate the Fed.”
The Fed kept interest rates unchanged at 5% to 5.25% last week but signalled it may still hike by as much as half of a percentage point by the end of 2023. — Reuters
