Philippine Central Bank holds rate at record low, signals no change anytime soon

As policymakers focus on supporting an economy which is showing signs of recovering after shrinking for five consecutive quarters, the Philippine central bank left its key interest rate steady at a record low.

As predicted by the economists, the Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at 2.0% for a fourth consecutive meeting. The rates on the overnight deposit and lending facilities were 1.5% and 2.5%, respectively. Even though sequential growth momentum pointed to an emerging recovery, the data shows that the economy contracted more than expected in the first quarter.

BSP Governor Benjamin Diokno said in a news report that on balance, the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings steady. He signalled no change in policy settings anytime soon. The risks to the inflation outlook were broadly balanced said Diokno.

Capital Economics Asia economist Alex Holmes said that provided inflation does begin to fall back later in the year and then rate cuts are likely in the second half of the year. Michael Ricafort, economist at Rizal Commercial Banking Corp, said the local economy still needs to get all the support measures that it can get amid limited funds for any additional stimulus measures.