Metro Manila (CNN Philippines, June 23) — The Bangko Sentral ng Pilipinas will keep policy rates steady at least until the middle of 2022, an Australian think tank projects.
In a quarterly economic outlook published Wednesday, ANZ Research notes the “efficacy of monetary policy is fading” given the recent drop in bank loans and “incomplete transmission of lower policy to lending rates.”
Outstanding loans of universal and commercial banks have been on the downtrend for five months now, plunging by as low as 5% in April.
This comes despite the BSP’s move to maintain key interest rates to 2%, an all-time low which has been in place since November’s surprise rate cut.
“While this anomaly weakens the case for a further reduction in the lending rate, liquidity injections to facilitate the government borrowing program are still necessary,” said ANZ Research.
With this, the research organization said it expects the BSP to “focus squarely” on implementing liquidity measures in 2021. The central bank has so far injected ₱2.2 trillion into the country’s financial system.
“As such, we expect policy accommodation to stay at least until mid-2022 following which the policy rate is likely to be raised gradually,” it said.
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ANZ Research joins other think tanks like Moody’s Analytics that earlier forecasted a retention of the current key interest rates at least for now. Capital Economics, meanwhile, projected a rate hike possibly by September.
The Monetary Board will be holding its fourth policy meeting for 2021 on Thursday.
