By Md Manzer Hussain

BENGALURU (Reuters), – A Reuters poll revealed that the Philippine central bank will not raise interest rates to a new record low of 2.0% until December in order to sustain an uneven economic recovery after the COVID-19 epidemic.

With the inflation rate remaining low compared to other advanced countries and the growth of the Southeast Asian country still slowing, Bangko Sentral ng Pilipinas’ (BSP), will remain dovish.

In a poll conducted February 1-14, 21 economists predicted that the BSP would maintain its benchmark rate of 2.0% for its February 17 meeting.

It was Governor Benjamin Diokno’s opinion that monetary policies would be accommodative so long as growth is supported. This view does not have to follow the U.S. Federal Reserve, which will likely raise interest rates next month.

Although the Fed tightened its monetary policy last cycle, it led to capital outflows from emerging countries leaving their currencies much weaker than before. Economists don’t expect this to happen again.

We don’t anticipate any major changes from the BSP in their policy, at least not yet. Robert Carnell from ING Asia-Pacific, the regional head for research, stated that Governor Diokno stepped back his dovish rhetoric following January’s moderate inflation. He indicated that he was not willing to ‘change courses’ during a recovery.

However, the BSP’s dovish stance in front of a Fed that is hawkish could put additional pressure on the Philippine Peso in near future.”

This year the Philippine peso was relatively stable. It has declined only 1% against US dollars. A Reuters poll from early January showed that the Philippine peso would remain around its current rate for the remainder of the year. [EMRG/POLL]

It was anticipated that the central bank would raise its key rate to 2.5% towards the end 2022. Then, 25 basis point increases in the second quarter 2023, and 25 more in the July-September quarter 2023, bringing rates up to 3.00%.

Nearly half (seven out of 15) of respondents predicted that there would be a rate rise of at most 25 basis points in the third quarter. This includes three people who claimed it would occur as early as April-June.

However, the majority of respondents to the poll believed that the central bank would remain in a waiting-and-watch mode until it changes gears.

The cautious approach mirrors that of some other central banks in Asia such as the Reserve Bank of India (RBI) and Bank of Thailand, which were expected not to try to reduce inflation but to be more accommodative.