The Bangko Sentral ng Pilipinas (BSP) is expected to maintain its policy rate at 6.25 percent amid predictions of subdued inflation and the potential effects of El Niño on the prices of essential goods. The Monetary Board, which chose to keep the benchmark rate unchanged in May, will convene for another policy meeting on June 22. According to ING Bank, the BSP is likely to hold interest rates steady as inflation continues to moderate and the US Federal Reserve also refrains from adjusting federal fund rates. This would mark the second consecutive meeting in which the BSP maintains its policy rate at 6.25 percent. Goldman Sachs shares the same expectation, citing the significant easing of headline inflation in recent months and the BSP’s projection that year-on-year inflation will return to the target range of 2 percent to 4 percent in the fourth quarter of this year. Additionally, Goldman Sachs notes the BSP’s decision to reduce banks’ reserve requirements by 250 basis points to 9.5 percent last week, a move that was anticipated after the end of the monetary policy tightening cycle to avoid sending mixed signals to the markets. While Goldman Sachs predicts that the BSP will keep its policy rate unchanged for the rest of the year as inflation continues to trend downward, it acknowledges the possibility of inflation or currency depreciation risks prompting a more hawkish central bank policy. Michael Ricafort, the chief economist at Rizal Commercial Banking Corp., expects a prolonged pause that would maintain the BSP’s policy rates at 6.25 percent, and he suggests that the reduction in reserve requirements will offset the impact of regulatory relief measures coming to an end in June. Robert Dan Roces, the chief economist at Security Bank Corp., concurs that the BSP rate will remain unchanged alongside the US Fed’s “hawkish hold.” He also considers the possibility of the BSP taking a more proactive stance to address risks related to inflation, peso depreciation, and Fed policy action. Pantheon Macroeconomics, based in the United Kingdom, expects the BSP policy rate to remain unchanged in the third quarter and to be reduced by 0.5 percentage point to 5.75 percent by the end of the year.
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