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Fitch Solutions sees inflation easing, BSP keeping rates through 2nd half of 2022

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<div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img src="http://sa.kapamilya.com/absnews/abscbnnews/media/2021/business/06/28/20200315-covid-grocery-fsj-8201.jpg"/><figcaption>People buying groceries. <em>Fernando G. Sepe Jr. ABS-CBN News file photo</em></figcaption></figure></div><p>MANILA - Fitch Solutions on Monday said it expects Philippine inflation to fall back within the BSP’s 2 to 4 percent target range &quot;over the coming quarters,&quot; and the Bangko Sentral ng Pilipinas to keep its policy rate on hold through the second half of 2022.</p><p>Fitch Solutions forecasts headline inflation to average 4 percent this year and 3.4 percent in 2022. </p><p>It noted that the headline inflation rate remained flat for the third consecutive month in May at 4.5 percent, but said it expects prices to moderate over the coming quarters.</p><p>“Food price inflation will also prove temporary as the effects of the African Swine Fever outbreak on pork prices recede over the coming quarters,” it said. </p><p>Fitch Solutions said it expects supply-chain disruptions to ease more substantially in 2022 as the Philippines gradually loosens border and mobility restrictions on the back of rising vaccination rates.</p><p>The global analytics firm also said that despite inflation remaining above the BSP’s target range since January, the country&#x27;s continuing challenges with the pandemic and uncertain path to economic recovery &quot;means that an accommodative monetary policy stance remains important to providing a supportive backdrop.&quot; </p><p>The BSP “will maintain accommodative monetary conditions until loan growth and domestic economic activity are on a sustained recovery and pandemic uncertainties have significantly abated,” Fitch Solutions said.</p><p>This is not expected to be achieved until the second half of 2022, Fitch Solutions said.</p><p>“As such, we at Fitch Solutions believe the BSP will only begin to hike once the Philippine economy is on a sustained economic recovery and domestic demand-side price pressures become stronger,” Fitch said. </p><p>“Accordingly, we forecast 50 bps of key policy rate hikes by end-2022.”<br/> <br/>The central bank kept its overnight reverse repurchase rate at a <a href="https://news.abs-cbn.com/business/06/24/21/bsp-interest-rates-unchanged">record low</a> 2 percent in its meeting last week. The key rate has been kept steady since <a href="https://news.abs-cbn.com/business/12/17/20/bangko-sentral-keeps-rates-steady-as-expected">December last year</a> to stimulate an economy battered by the COVID-19 pandemic. </p><p>Last month, Fitch Solutions <a href="https://news.abs-cbn.com/business/05/12/21/fitch-solutions-lowers-ph-growth-forecast-says-rebound-to-be-slower">lowered</a> its economic growth forecasts for the Philippines for this year and next year noting that the country is having difficulty checking the COVID-19 outbreak, and is struggling to vaccinate its citizens. </p><ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/business/06/03/21/philippines-prepared-for-us-fed-policy-adjustment">Bangko Sentral ng Pilipinas ready for any US Fed policy adjustment: Diokno</a></li></ul><div><strong>RELATED VIDEO</strong></div><figure class="op-interactive"><iframe allow="autoplay; fullscreen" frameBorder="0" height="100%" id="ivsplayer01" scrolling="no" src="https://player.ivideosmart.com/ivsplayer/v4/dist/html/iframe-src.html?iframeid=ivsplayer01&amp;key=e8c22c015ca9eafa76f1e3edfa03c603&amp;spid=3001339&amp;vid=1715733" width="100%"></iframe></figure><div class="iwantbar">Watch more in <a href="//www.iwantv.com.ph/">iWantv</a> or <a href="//tfc.tv/">TFC.tv</a></div>

<p>Fitch Solutions on Monday said it expects the Bangko Sentral ng Pilipinas to keep its policy rate on hold at 2 percent through the second half of 2022 before hiking it by 50 basis points at the end of next year. <br /> </p>

Fitch Solutions on Monday said it expects the Bangko Sentral ng Pilipinas to keep its policy rate on hold at 2 percent through the second half of 2022 before hiking it by 50 basis points at the end of next year.