NextGen Day

MANILA, Philippines – Moody’s Analytics forecasts the Bangko Sentral ng Pilipinas (BSP) will maintain its policy rate unchanged on Thursday, despite the deceleration of domestic inflation, but projects a policy hike in the third quarter of this year.

“The Bangko Sentral ng Pilipinas now has additional breathing room to maintain rates on hold, as inflation has moderated from its August peak of 4.4 percent year on year,” Moody’s Corporation’s financial intelligence and analytical tools unit said in a report released Monday.

The Monetary Board (MB) of the BSP, which sets policy, slashed the central bank’s key policy rates by a total of 200 basis points in 2020 to encourage lending and cushion the domestic economy from the pandemic’s impact.

It is widely expected to maintain the central bank’s key rates unchanged in the face of decelerating domestic inflation, which stood at 3% in February.

BSP Governor Benjamin Diokno has stated repeatedly that the country is unlikely to raise rates at the moment due to the need to support the domestic economy’s recovery.

According to Moody’s Analytics, monetary authorities are “closely monitoring inflation expectations.”

It stated that Russia’s invasion of Ukraine has exacerbated the downside risks associated with rising global energy and food prices.

“Monetary policy is expected to normalize in the September quarter,” the report stated, adding that “movement restrictions imposed to slow the spread of the Omicron variant of Covid-19 (coronavirus disease 2019) have weighed on domestic demand in the first months of 2022.”

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