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MANILA – DBS said the Bangko Sentral ng Pilipinas is likely to keep interest rates unchanged during today’s meeting of its policy-making Monetary Board
In a research note, DBS said the BSP is more concerned about economic growth despite the “impressive” 6.4 percent expansion in the first quarter.
“In particular, the rebound [in] electronics that propelled 1Q growth is not likely to be sustained against a backdrop of slowing global growth in the coming quarters. As such, we believe that the OBR can be held unchanged for the rest of this year in order to
support the domestic economy and cushion against external shocks,” DBS said, referring to the BSP’s overnight borrowing rate, which stands at a record low of four percent.
DBS said the BSP has “considerable policy wriggle room” given less concern for inflation, which eased to 2.9 percent in May, below the three to five percent target range of Philippine monetary officials.
“Although base effects have turned unfavorable, declining oil prices have helped ensure that the increase in headline inflation remains muted,” DBS said.
It forecast Philippine inflation settling at the low end of the BSP target range.
Besides inflation, the BSP also can take comfort in the Philippines’ “outperformance” vis-à-vis peers in terms of portfolio flows, DBS said.
“Overall, this means that there is room for further rate cuts if the global economy worsens significantly,” the lender said.
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