Philippine central bank to keep steady hand on policy lever until Q4'22

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Philippine central bank to keep steady hand on policy lever until Q4'22

The Philippine central bank will wait until the end of the year before raising interest rates from a record low 2.0per cent to support an uneven economic recovery from the COVID-19 pandemic, a Reuters poll found.

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With inflation remaining subdued compared to advanced economies and growth in the Southeast Asian nation yet to return to pre-pandemic levels, the Bangko Sentral ng Pilipinas (BSP) will stick to its dovish stance.

All 21 economists in a Feb. 1-14 poll predicted the BSP would leave its benchmark rate at 2.0per cent at its Feb. 17 meeting.

That was in line with Governor Benjamin Diokno's view monetary policy would remain accommodative as long as required to underpin growth and not necessarily follow the U.S. Federal Reserve which is expected to raise rates next month.

While the Fed's last monetary policy tightening cycle led to heavy capital outflows in emerging economies leaving local currencies considerably weaker, economists do not predict a repeat this time.

"We don't expect any changes in policy from BSP, at least for now. Governor Diokno stepped up his dovish rhetoric after inflation moderated in January, indicating that he did not want to 'change course' in the middle of a recovery," wrote Robert Carnell, regional head of research for Asia-Pacific at ING.

"However, the dovish BSP stance against the backdrop of a hawkish Fed could translate into additional pressure on the Philippine peso in the near term."

The Philippine peso has been relatively stable this year, depreciating only about 1per cent against the U.S. dollar. A Reuters poll taken early last month showed the peso would hover around the current rate this year.