Philippines: Extended pause view after BSP off-cycle move – UOB

UOB’s Global Economics & Markets Research, via Julia Goh and Loke Siew Ting, notes that the central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP) kept the RRP (Reverse Repurchase Rate) rate at 4.25% in an off-cycle meeting as supply-driven inflation and Middle East risks intensify. The bank expects a prolonged policy pause, with core inflation and second-round effects guiding decisions and fiscal policy taking a larger role.

BSP seen on prolonged policy pause

"In view of the fluid situation and uncertainty over the duration and severity of the Middle East conflict, we maintain a cautious stance and continue to expect no further RRP rate changes for the time being."

"Persistently weak domestic demand alongside elevated living costs supports the case for a prolonged policy pause, with fiscal measures likely to play a larger role in mitigating the economic fallout from the Middle East conflict."

"In sum, we expect the BSP to maintain a meeting-by-meeting approach while closely monitoring external developments."

"During the post-meeting briefing, the BSP Governor did not rule out the possibility of additional off-cycle meetings should the Middle East conflict escalate and pose more immediate economic risks."

"He also noted that the BSP stands ready to inject liquidity into the financial system if needed and could further reduce the reserve requirement ratio (RRR), potentially to around 2.00%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)