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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the latest interest rate decision by the central bank of Philippines (BSP).

Key Quotes

“Bangko Sentral ng Pilipinas (BSP), as expected, maintained its overnight reverse repurchase (RRP) rate unchanged for the second straight meeting at a record low of 2.25%… Correspondingly, both the overnight lending and deposit rates were kept steady at 2.75% and 1.75% respectively. The reserves requirement ratio (RRR) for commercial banks was also left untouched at 12.00%.”

“Today’s rate decision came as the inflation outlook remains consistent with the central bank’s assessment at lower projection rates for 2020-2022, global economic activity has stabilised in recent weeks, and there are encouraging signs of recovery in domestic economic activity. Downside risks to the inflation outlook could mainly emanate from potential disruptions to domestic and global economic activity amid the ongoing pandemic. Hence, BSP reckons a continued rate pause will allow previous measures to further work their way through the economy, while the gradual easing of restrictions and sustained government efforts should help lift market sentiment and aid the economic recovery in succeeding months.”

“In sum, the overall tone of the latest monetary policy statement is deemed slightly more upbeat than Aug’s statement. This infers higher odds for a prolonged rate pause by BSP going into 2021. In addition to this, BSP Governor also stated in an interview with ANC’s Market Edge on 21 Sep that monetary authorities are likely to maintain the current monetary setting over the next two years to help the economy fully recover from the impact of the pandemic… As such, we keep our view that BSP will leave both the RRP rate and RRR for commercial banks unchanged at 2.25% and 12.00% respectively through 2021.”