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Philippines: Analysts expect more BSP interest rate cuts
Analysts expect the Bangko Sentral ng Pilipinas (BSP) to further reduce interest rates after the country’s headline inflation dipped to a five-month low of 2.2 percent in April.
According to ING Bank Manila, ANZ Research, Nomura and JP Morgan analysts, lower consumer price growth last month gives the central bank more space to continue easing monetary policy.
“We expect only a 25-bps (basis points) policy cut if ever [the] BSP opts to ease further, as the policy rate edges closer to [its] own inflation forecast of 2.2 percent for the year,” ING Bank Manila senior economist Nicholas Antonio Mapa said.
He added that inflation was expected to be subdued for a month after the end of the lockdowns implemented to contain the spread of the coronavirus disease 2019 (Covid-19) in the country.
ING Bank Manila also predicted a steady acceleration in price pressures in the second half of the year, as supply side pressures outweigh the demand side pull, Mapa said.
ANZ Research analysts said “inflation dynamics remain supportive of the current monetary policy stance,” while those from Japan-based Nomura continue to forecast an additional 75-bps rate cut, which they said would be delivered within the second quarter.
The “BSP has policy space to respond to a further deterioration in the growth outlook due to the Covid-19 [pandemic], supported by headline inflation returning to a downward trajectory and even falling below the BSP’s [target range of] 2 to 4 percent.”
According to JP Morgan economist Nur Raisah Rasid, a slower underlying inflationary trajectory opened room for further BSP easing.
“Thus, we recently added a 25-bps policy cut, beyond the 25-bps penciled in for this quarter, bringing the” reverse repurchase rate at the end of the second quarter “to 2.25 percent,” she said.
The central bank has so far trimmed policy rates by a total of 125 bps this year.
Responding to the April inflation figure, BSP Governor Benjamin Diokno said it was consistent with the Bangko Sentral’s “prevailing assessment that inflation is expected to be benign over the policy horizon due to the adverse impact of the coronavirus pandemic on the domestic and global economy.”
Source: https://www.manilatimes.net/2020/05/06/business/business-top/analysts-expect-more-bsp-interest-rate-cuts/722965/