BSP Preview – February 2021

MNI Point of View: Long Pause

• This week's monetary policy decision from BSP is set to come and go after Governor Diokno repeatedly voiced the central bank's view that the Board is done with monetary easing for now. In last month's speech, Diokno noted that "there will be a long pause as far as cutting is concerned," at least through the first half of 2021.
• Inflation data released last week reinforced expectations that the Monetary Board will leave its overnight borrowing rate unchanged. CPI accelerated to +4.2%, topping market expectations and breaking above the central bank's target range of +2-4%. That being said, BSP is in no rush to hike either - the Covid-19 pandemic wrought havoc on the Philippine economy, with January GDP report for 2020 confirming the worst recession on record.
• The central bank will likely maintain its accommodative stance, while stressing the need for fiscal stimulus to play a greater role. The Monetary Board's rhetoric will be scrutinised for any clarity surrounding alternative instruments amid speculation that RRR cuts remain on the cards, but these may well come outside of regular monetary policy meetings, if at all.

Please use the following link to access the full preview:

MNI BSP Preview February 2021.pdf