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Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group evaluated the recent decision by the BSP to leave the monetary conditions unchanged at this week’s meeting.

Key Quotes

“Bangko Sentral ng Pilipinas (BSP) kept its overnight reverse repurchase (RRP) rate unchanged at 4.00% today as hinted by Governor Benjamin Diokno on 4 Nov. Accordingly, the overnight deposit and lending rates were left unchanged at 3.50% and 4.50%, respectively. BSP said this prudent pause in monetary adjustment will enable the cumulative 75bps cut in overnight RRP rate and the 300bps reduction in reserve requirement ratio (RRR) to date to filter through the economy”.

“The overall tone of the latest monetary policy statement was largely unchanged from September’s, whereby future decisions are likely to be data and event dependent”.

“With domestic growth prospects expected to improve further and risks to the inflation outlook remaining contained, we believe BSP will keep its overnight RRP rate steady at 4.00% at its final monetary policy meeting for the year on 12 Dec. That said, the central bank has sufficient policy space to ease further going into 2020 given that inflation expectations remain well anchored within the BSP’s target range of 2.0%-4.0%”.