Philippines: Door to further rate cuts not yet closed — BSP chief
MANILA, Philippines — The Bangko Sentral ng Pilipinas will likely resume cutting its benchmark rate next year, according to its governor, who said monetary authorities are on a wait-and-see mode as the previous rate cuts work their way through the economy.
“We’re maybe considering around 50-basis points next year,” BSP Governor Benjamin Diokno told Bloomberg on Friday.
“We have paused because we want to find out how the 75-basis point [rate cuts] that we did this year and 400 basis points cut in the reserve requirement is going through the system,” Diokno added.
Inflation snapped five consecutive months of downtrend and accelerated to 1.3% in November versus the preceding month’s 0.8%. Year-to-date, inflation averaged 2.5%, still within the government’s 2%-4% annual target.
At their final meeting in 2019, the central bank kept its policy rate unchanged at 4%, citing “benign” inflation.
Banks typically use the BSP’s benchmark rate as basis when charging loans to consumers and businesses. Lower borrowing costs encourage bank lending activity that, in turn, fuels economic growth.
But the BSP said “upside risks” to inflation next year could come from volatile oil prices and the impact of African swine fever outbreak and weather disturbances on food prices.
Some analysts are penciling in another rate cut next year amid expectations that economic growth will likely disappoint. — Ian Nicolas Cigaral