The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) is expected to leave its policy rate steady at two percent during Thursday’s policy meeting, according to Moody’s Analytics.

“The near-term prospects remain worrisome for the Philippines as the country copes with an intense domestic outbreak of COVID-19, which has necessitated the extension of restrictions in the capital city and nearby provinces until the end of June,” noted Moody’s Analytics in its latest commentary on Asia Pacific economies.

“Although the central bank has responded to the crisis with rate cuts and substantial liquidity easing measures, it is expected to retain ammunition for now and delay further action until restrictions are eased and sectors can respond to new stimulus,” it added. Moody’s Analytics is the financial intelligence subsidiary of Moody’s Investors Service.

The credit rating agency, which has tagged the Philippines as an economic laggard in the region, has said that they continue to expect the local economy to gradually recover this year as government eases lockdown and containment measures while fiscal policies support consumer spending and investment.

However, a resurgence in infection rates and a reinstatement of some social-distancing measures will slow the economic recovery in first half of 2021, Moody’s said in an April Philippine banking outlook report.

The central bank expects inflation rate will remain at the four percent level in the second quarter months of April and May – which reported 4.5 percent both – until June.

BSP Governor Benjamin E. Diokno said the second quarter inflation outturns so far remains consistent with the BSP’s expectations that inflation will remain above the upper end of the two-four percent target range while meat and oil prices are on the high side.

Diokno said last week that they also continue to expect that inflation will slow down and drop below the two-four percent target in the second half of 2021 and 2022. Risks to the inflation outlook remains broadly balanced, as far as BSP is concerned, but it is also crucial for inflation control that there is enough meat in the coming months.

The BSP’s Monetary Board will meet on June 24, its fourth policy meeting for the year. It has kept the benchmark rate at two percent for the past three policy meetings.

The BSP’s latest inflation forecasts for 2021 is 3.9 percent and three percent for 2022 – both averages are within the target band of two-four percent.

Inflation rate averaged at 4.5 percent in the first quarter 2021, this was higher than fourth quarter 2020 of 3.1 percent. As of end-May, the average is at 4.4 percent.

The BSP’s interest rates on the overnight deposit and lending facilities are still at 1.5 percent and 2.5 percent, respectively.