The Philippines: BSP may consider rate hike in Jun 22

• THE PHILIPPINE central bank may consider a rate hike in Jun 22 as economic recovery likely gained more traction in 1Q22, its governor said.
• Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the 19 May 22 policy meeting will already take into consideration 1Q22 GDP data that will be released on 12 May 22.
• “We will look at the new data and hopefully it will show the first-quarter growth, maybe around 6-7%,” Mr. Diokno told Bloomberg TV. “And so, on the basis of that, maybe we’ll wait another cycle… We have another meeting in Jun 22. And maybe that’s the time when we will consider the increase in policy rates,” he added.
• The BSP has maintained interest rates at a record low since Nov 20 to support the Philippine economy’s recovery from the pandemic.
• Mr. Diokno’s latest statement is a departure from the BSP’s previous signals it will only begin policy rate adjustments in 2H22 once it sees signs of firmer economic recovery.
• Government officials expect GDP to get back to its pre-pandemic level within 2H22. The BSP chief said there is still “no evidence of second-round effects [of inflation] from the demand side.”
• “I think we can afford to wait as to what will be the move of the Fed in the next two meetings,” Mr. Diokno said. The Fed’s next policy review is on 3-4 May 22.
• At its close of PHP52.41 per dollar on 25 Apr 22, the peso has weakened by 2.8% from its end-2021 finish of PHP50.999. “We’re not concerned about the depreciation,” Mr. Diokno said, adding this is in line with the decline in other regional currencies.
• Meanwhile, Mr. Diokno said a reduction in the banks’ reserve requirement ratio (RRR) is still on the table. Such a move is “not related to the crisis at all,” the BSP chief said, adding that he wanted to bring down the RRR to a single digit by the end of his term in 2023 even prior to the pandemic.
• “That’s still on the table. We will allow them [banks] to lend out the money rather than the central bank getting the money from them,” he said. The reserve requirement for big banks is currently at 12%.

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