MANILA (Reuters) — The Philippine central bank is expected to leave its benchmark interest rate unchanged on Thursday to maintain support for an economy facing fresh challenges after new curbs to contain a resurgence in Covid-19 infections, a Reuters poll showed.
All 13 economists surveyed predicted that the Bangko Sentral ng Pilipinas or BSP will keep the rate on its overnight reverse repurchase facility at a record low of 2.0% for a third straight meeting.
The government has reimposed stricter rules on movements in the capital Manila and nearby provinces as daily spikes in Covid-19 cases hit the highest since the pandemic began, threatening hopes for an economic rebound after last year’s record contraction.
But the inflation rate, which in February hit a 26-month high outside the 2%-4% target mainly due to food supply-related pressures, limits the BSP’s capacity to provide a much-needed extra boost for the economy.
“The Philippine central bank is stuck between a rock and a hard place,” Capital Economics said in a note. “The economy remains in need of more support. A surge in new virus cases will hold back the recovery.”
Some of the economists in the poll expect the BSP, which meets every six weeks, to keep the policy rate steady throughout the year, while a few are not ruling out a further cut after last year’s 200-basis point reduction.
If the inflation uptrend proves temporary as the BSP expects, Capital Economics said there might be room for further easing with a possible 50-bps rate cut.
“We expect the policy rate to remain on hold for the next few meetings, but are non-consensus in our view that cuts will resume later in the year,” said Capital Economics’ Asia economist Alex Holmes.