Philippines leaves key rate steady

Philippines leaves key rate steady

Labours work at a construction site as smog covers Jakarta on Thursday. (Reuters photo)
Labours work at a construction site as smog covers Jakarta on Thursday. (Reuters photo)

The Philippines’ central bank held its key interest rate steady for a fifth straight meeting to help support an economic recovery it described as “tentative”.

Bangko Sentral ng Pilipinas left the benchmark rate at 2% Thursday, as predicted by all 20 analysts in a Bloomberg survey.

"Economic activity has improved in recent weeks, but the overall momentum of the economic recovery remains tentative as the threat of Covid-19 infections continues," Governor Benjamin Diokno said in a briefing in Manila. The central bank "affirms its support to the economy for as long as necessary to ensure its strong and sustainable recovery".

Six-month peso non-deliverable forwards rose 0.2% to 49.27 per dollar after the decision.

While inflation remains above the bank’s 2%-4% target, it has steadied and gives room to maintain support to a flagging economy. Economists have slashed the country’s growth outlook by the most among Asia’s major economies, making it among the slowest to recover from the pandemic.

The central bank raised its inflation forecast for this year to 4% — from 3.9% at its last meeting due to higher oil prices — before expecting price increases to moderate to 3% in 2022 and 2023.

Some analysts see the pause on the interest-rate front extending to next year.

The central bank "will likely hold off on any moves for the balance of the year to bolster the economic recovery," ING Groep NV senior economist Nicholas Mapa said. "The threat of a surge in Covid-19 infection weighs on growth prospects and the economy will need all the help it can get".

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