Bank of the Philippines Seen Maintaining Key Policy Rate at 6.25%

The Bangko Sentral ng Pilipinas (BSP) is expected to maintain its policy rate at 6.25 percent, despite concerns about the impact of El Niño on food prices. The BSP’s Monetary Board, which decided to keep the benchmark rate unchanged in May, is scheduled to meet again on June 22. ING Bank believes that the BSP will hold interest rates steady due to the easing inflation and the recent decision by the US Federal Reserve to leave rates unchanged. This would be the second consecutive meeting where the BSP keeps the policy rate at 6.25 percent. Goldman Sachs also expects the BSP to keep the rate unchanged, as they anticipate inflation to return to the target range by the end of the year. The American group also notes that the BSP recently reduced banks’ reserve requirements, a move that was previously mentioned to occur after the end of the tightening cycle. Going forward, if inflation continues to trend downwards, Goldman Sachs predicts that the BSP will keep the policy rate unchanged for the rest of the year. However, they acknowledge that upside risks to inflation or currency depreciation could lead to a more hawkish monetary policy. Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., believes that the BSP will maintain the current rate due to the regulatory relief measures coming to an end. Robert Dan Roces, chief economist at Security Bank Corp., agrees that the BSP rate will remain unchanged along with the US Fed’s stance. He suggests that the BSP may want to keep interest rates ahead of the curve to manage potential risks. Pantheon Macroeconomics, based in the UK, expects the BSP policy rate to remain unchanged through the third quarter, and then to be reduced to 5.75 percent by the end of the year.

 

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