MANILA – Moody’s Analytics forecasts steady policy rate for the Bangko Sentral ng Pilipinas (BSP) on Thursday given the deceleration of domestic inflation rate but projects a policy hike in the third quarter of this year.
“Bangko Sentral ng Pilipinas has some added breathing space to keep rates on hold because inflation has cooled from its August peak of 4.4 percent year-on-year,” the financial intelligence and analytical tools unit of Moody’s Corporation said in a report released Monday.
BSP’s policy-making Monetary Board (MB) slashed the central bank’s key policy rates by a total of 200 basis points in 2020 to encourage lending and cushion the impact of the pandemic on the domestic economy.
It is widely expected to still keep the central bank’s key rates steady following the deceleration of domestic inflation rate, which stood at 3 percent last February.
BSP Governor Benjamin Diokno has repeatedly said the country is unlikely to raise rates now given the need to support the recovery of the domestic economy.
Moody’s Analytics said monetary authorities are “keeping a close watch on inflation expectations.”
It said Russia’s invasion of Ukraine has heightened upside risks from high global energy and food prices.
“Monetary policy is expected to start normalizing in the September quarter,” it said, adding that “movement restrictions to slow the spread of the Omicron variant of Covid-19 (coronavirus disease 2019) have hurt domestic demand in the opening of months of 2022.” (PNA)
