Indonesia, Philippines hold key rates steady as recoveries gain speed

[MANILA] Central banks in Indonesia and the Philippines held their key interest rates steady to help entrench economic recoveries that are picking up pace as South-east Asia's worst Covid outbreaks recede.

Bangko Sentral ng Pilipinas left the benchmark rate at 2 per cent on Thursday (Dec 16), as predicted by all 20 economists in a Bloomberg survey. Minutes later, Bank Indonesia held its key rate at 3.5 per cent, as all 27 economists surveyed expected.

Monetary authorities in both countries will be watching closely for any emerging-market fallout from the Federal Reserve's decision Wednesday (Dec 15) to speed up its exit from pandemic-era policies that supported the US economy.

Indonesia has a sizable interest-rate premium over US Treasurys, while elevated inflation has put the Philippines' policy rate in negative real territory.

"The Monetary Board sees enough scope to keep a patient hand on the BSP's policy levers owing to a manageable inflation environment," Bangko Sentral ng Pilipinas Governor Benjamin Diokno said in Manila. "Preserving ongoing monetary policy support at this juncture shall help sustain the economy's momentum over the next few quarters."

The peso climbed as much as 0.6 per cent after the decision, its biggest jump in more than a month. The Philippine currency has been the best performer in Asia in December.

In Indonesia, Governor Perry Warjiyo said next year's monetary policy will be "pro-stability". That's a change from the "pro-growth" stance the bank has pursued for most of 2021, but reiterates a message he has delivered recently.

The yield on Indonesia's 10-year bonds rose 2 basis points after the decision to 6.42 per cent, while the rupiah stayed 0.2 per cent weaker at 14,365 a dollar and the benchmark stock index slipped 0.5 per cent as of 2.40 pm in Jakarta.

BLOOMBERG