BSP seen cutting rates by 25bps
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Tue, 06 Aug 2019 17:10:28 +0000
THE Bangko Sentral ng Pilipinas (BSP) is likely to resume its monetary policy easing on Thursday following the release of July inflation data and the scheduled release of Philippine economic growth data for the second quarter that day, according to economists.
In a comment on Tuesday, ING Bank Manila senior economist Nicholas Antonio Mapa expressed the belief that “we will see at least a 25bps (basis points) rate cut, (with the door open for 50bps).”
HSBC economist Noelan Arbis also expects a 25bp reduction and an additional 25bp cut by yearend.
“[R]educing real interest rates and further easing domestic liquidity constraints would be beneficial to supporting growth,” he said.
Nomura Securities Ltd. economist Euben Paracuelles shared the view, and said he expected the second 25bp reduction by September, “justified by falling inflation, which should also influence inflation expectations.”
For his part, Union Bank of the Philippines senior economist Ruben Asuncion said the Aboitiz-led lender “sees a big window” for the rate cut on Thursday.
In a message, BSP Governor Benjamin Diokno said the July inflation rate and second-quarter economic growth, as well as “a host of other developments locally and abroad, will be considered as the MB (Monetary Board) deliberates on the appropriate policy stance on August 8.”
Their comments come after the Philippine Statistics Authority announced on Tuesday that the country’s headline inflation further eased to 2.4 percent last month from 2.7 percent in June and 5.7 percent in July 2018. The latest figure falls within the BSP’s projection of between 2.0 percent and 2.8 percent.
Above-target inflation prompted the Bangko Sentral’s policymaking MB to hike key interest rates five consecutive times last year. It only paused after consumer price growth decelerated to 6 percent last November from 6.7 percent last September and October.
The central bank started easing its monetary policy settings on May 9, but decided to take a “prudent pause” on June 20 by keeping its overnight borrowing, lending and deposit rates at 4.50 percent, 5 percent and 4 percent, respectively.
Despite the pause, monetary authorities cut their 2019 inflation forecast to 2.7 percent from 2.9 percent, and their 2020 projection to 3 percent from 3.1 percent.