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Moody’s unit sees BSP maintaining interest rate

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The Bangko Sentral ng Pilipinas (BSP) will likely maintain the overnight borrowing rate steady at 6.5 percent in its meeting Thursday amid the downward trajectory of inflation, Moody’s Analytics, which operates independently of the Moody’s Investors Service credit rating agency, said in a report Monday.

“The fight against inflation in the Philippines is back on track, with headline inflation cooling to 4.9 percent year -over-year in October from 6.1 percent in September. Inflation is lower than the 5.1 percent to 5.9 percent that Bangko Sentral ng Pilipinas expected,” it said.

Core inflation, which excludes certain food and energy items, also cooled to 5.3 percent year-on-year from 5.9 percent in September. “We expect inflation to ease over the last two months of 2023 but stay above BSP’s target range of 2 percent to 4 percent,” it said.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. earlier said the Monetary Board would look at inflation and gross domestic product data before deciding on whether to tweak the prevailing policy stance.

The Philippine economy grew 5.9 percent in the third quarter, faster than 4.3 percent in the second quarter, driven by strong performances of the services, industry and agriculture sectors.

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The third-quarter performance almost touched the low end of the target range of 6 percent to 7 percent for the year.

Remolona also hinted that “nicer data” might compel monetary authorities to pause in the next meeting.

The Monetary Board on Oct. 26 raised the policy rate by 25 basis points to 6.5 percent in an off-cycle move to rein in inflation.

Remolona also said he was no longer expecting inflation to return to the target range of 2 percent to 4 percent this year.

Moody’s Analytics said in the same report that the Philippine economy would have to weather domestic and global storms in the fourth quarter of the year.

“The aggressive run of monetary policy tightening in 2023 should be over, but rate cuts are off the table until the middle of next year. Until then, household budgets will remain under pressure,” it said.

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