ECONOMISTS see a repeat of the August Monetary Board (MB) meeting when it meets on Thursday, since the current monetary policy remains appropriate and inflation is still seen to fall below target for the year.
The MB is seen to keep all rates steady at 6 percent for the repurchase rate and 4 percent for the reverse repurchase rate, as well as special deposit accounts interest rate at 2.5 percent and an unchanged reserve requirement ratio.
This, amid recent developments in the local and international market—such as the improved, but still anemic, growth reported in the second quarter of the year, as well as the recent decision of the Federal Reserve (the Fed) to keep its interest rates steady for the time being.
Economists are of the view that, with the improved growth in the second quarter of the year, economic expansion is seen to continue until the third quarter, proving that the economy does not need any additional stimulus from the Bangko Sentral.
“Growth is seen to rebound in the third quarter, with domestic spending picking up and domestic activity accelerating with election fever coming into play,” Bank of the Philippine Islands research officer Nicholas Mapa said.
“Domestic growth remains robust, which does not support the case for rate cuts in our view,” Standard Chartered economist Jeff Ng said.
Parallel to the expectation of higher growth in the third quarter of the year is also the anticipation that inflation will start to pick up in the fourth quarter of the year.
“Inflation is also likely to rebound, after slowing to record-low levels in recent months,” Ng added, while ING Bank Manila economist Joey Cuyegkeng said that the low-inflation environment delivers monetary leeway to keep policy rates low.
Despite this, BDO Unibank Inc. chief market strategist Jonathan Ravelas, as well as Security Bank economist Patrick Ella, sees inflation to average below the government’s 2-percent to 4-percent target range for the year, with forecasts of 1.5 percent and 1.7 percent, respectively.
The Fed decision to hold also is seen to give the central bank more policy space to keep rates on hold.
“The Fed’s decision to hold steady initially added financial-market volatility, but this has calmed, and, all in all, I don’t think it will sway the central bank one way or another,” Moody’s Analytics Economist Katrina Ell said.
All six economists forecast a no-change in policy in the upcoming meeting on September 24.