MANILA: The Philippine central bank looks certain to leave its key interest rate on hold when it meets for the first time this year on Thursday, with inflation expected to stay under control even as growth remains solid buoyed by domestic demand.
All 10 economists in a Reuters poll predicted the central bank's policy making Monetary Board will keep the overnight borrowing rate steady at 4%, where it has been since September 2014.
The resilient economy has managed to largely shrug off a growing global chill, as strong private consumption and higher government spending cushioned the impact of weak exports, which are hurting many of its larger, trade-reliant Asian neighbours.
Growth this year should find support from higher government and private consumption in the run up to the May 9 presidential elections. From 5.8% in 2015, growth is expected to accelerate to 6.2% in 2016, based on a Reuters poll in January.
Domestic consumer prices were expected to trend higher this year but settle within the central bank's 2%-4% target for 2016 and 2017.
"The continued strength in domestic demand implies that there is no need for monetary policy support at the moment. Headline inflation remains benign," said Eugenia Victorino, economist at ANZ in Singapore.
Economists will be watching for more details on the central bank's plan to set an interest rate corridor in the second quarter, which would likely entail adjustments in the overnight borrowing, lending and special deposit account rates.
Bangko Sentral ng Pilipinas governor Amando Tetangco told Reuters last month the interest corridor system, or IRC, is an operational adjustment and is not meant to reflect a change in the country's monetary policy stance.
The IRC will be accompanied by a term auction facility that will allow banks to deposit money with the monetary authority to guide market interest rates towards the central bank's main policy rate.
At least four economists who gave long-term projections on interest rates believe the central bank's next move will be a hike in the second half of the year.
"Although we are pencilling in a total of 50 basis points of rate hikes in the second half, this is contingent on how the BSP will implement the interest rate corridor system," Victorino said. - Reuters
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