THE Bangko Sentral ng Pilipinas (BSP) is expected to hold off increases in monetary-policy rates during its upcoming meeting after the country’s GDP grew at a slower-than-expected pace in the third quarter.
In an analysis following the government’s announcement of a 6.1-percent growth in the third quarter, ING Bank Manila senior economist Nicholas Mapa said the Monetary Board (MB) may be looking at keeping the rates unchanged in its meeting next week.
“The disappointing growth print may give some ammunition for the doves to call for a pause at next week’s November 15 MB meeting,” Mapa said.
In an effort to curb the stubbornly rising inflation earlier this year, the BSP consistently pulled several rate hikes in 2018, hitting a total of 150 basis points for the entire year.
“The 150 basis points cumulative rate hike for the year is likely weighing down on consumption and will dampen investment going forward,” Mapa said.
Prior to the GDP announcement on Thursday, ING Bank Manila was of the view that the BSP may pull of a “moderate” rate hike in its November meeting, to the tune of 25 basis points.
“Holding off on an additional rate hike, as marginal as it may be, would give the Philippine economy the breathing room it needs to catch its breath and resume its above 6-percent growth trajectory in fourth quarter with the midterm election in sights,” Mapa said.
“With the 6.1-percent print, the likelihood for a stay has increased with recent dovish undertones from key voting BSP officials likely to pick up as slowing consumption is now a ‘concern’ according to the government,” he added.
BSP Governor Nestor A. Espenilla Jr. said in a statement that as inflation starts to go down toward the end of the year, Central Bank officials will have to assess other economic indicators to see if there is still a need for tightening during the BSP’s upcoming meeting.
“The MB will take into account there’s and other incoming date including GDP at its next policy meeting when it determines if there’s still need for further policy rate adjustments,” Espenilla said.
The BSP is expected to have their next monetary-policy meeting on November 15. This will be their second to the last meeting for the year.
Image credits: Nonoy Lacza