MANILA – ANZ Research has forecast the policy-making Monetary Board of the Bangko Sentral ng Pilipinas (BSP) to hold key rates steady during their setting meeting in August.
This, after the total of 150 basis points reduction in the central bank’s key policy rates from March to June in a bid to help buoy the domestic economy from the impact of the pandemic.
“While the door for further easing remains open, we expect a pause in August,” it said in a report.
The MB will have its fifth rate-setting meeting on August 20.
BSP’s key rates were slashed by 50 basis points each last March 19, April 16, and June 25, with the cut last June a surprise for many given the aggressive reduction in the previous two rate-setting meetings.
Amidst expectations that the MB will keep key rates steady next month, Philippine monetary authorities are expected to still deliver another rate cut before the end of the year to help lift domestic growth.
In the first quarter of the year, growth, as measured by gross domestic product (GDP), contracted by 0.2 percent, the first negative output since the last quarter of 1998.
This happened even as the enhanced community quarantine (ECQ), put in place to limit people’s movements and counter the rise of coronavirus disease 2019 (Covid-19) infections, was implemented only starting May 17 throughout mainland Luzon, or the last two weeks of the first quarter.
Metro Manila was placed under community quarantine starting March 15 but authorities later decided to widen the quarantine to mainland Luzon to further ensure that transmission of the virus will be addressed.
The ECQ lasted until May 15 for areas outside Metro Manila while it was extended until the end of May for Metro Manila.
Aside from restricting people’s movement for health reasons, the quarantine hampered economic activities.
Luzon accounts for about 70 percent of the country’s total annual output.
As a result, economic managers have revised their growth target for this year to a contraction of between 2 to 3.4 percent but they forecast growth to recover next year to about 8 to 9 percent. (PNA)
