Analysts see another BSP rate cut this year
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Fri, 09 Aug 2019 16:20:42 +0000
PHILIPPINE monetary authorities are likely to implement another 25-basis-point (bp) cut on the Bangko Sentral ng Pilipinas’ (BSP) interest rates before the end of the year to boost the slowing economy amid the lower inflation rate, according to analysts.
ING Bank Manila and HSBC analysts both see the central bank’s policy-making Monetary Board implementing the rate reduction as early as September.
“With [the] BSP’s recent string of easing and government spending back online in 2H (second half), the Philippines will look to finish the year strong with growth fueled by all sectors of the economy to get growth above 6 percent by yearend,” ING’s senior economist Nicholas Antonio Mapa said.
For his part, HSBC economist Noelan Arbis said the benign inflation trajectory in the months ahead gave scope for the Bangko Sentral to ease monetary policy further.
“Headline inflation continues to moderate and we expect it to fall further, potentially dropping below the BSP’s 2.0 to 4.0 percent target range by September,” he said.
The Philippine Statistics Authority announced on Tuesday that consumer price growth decelerated to 2.4 percent last month, slower than June’s 2.7 percent and 5.7 percent in July 2018.
ANZ Research analysts, meanwhile, expect the central bank to trim interest rates in November.
“The BSP has kept the door to further easing open, contingent on a sustained moderation in inflation. The central bank expects inflation to fall in the coming months on a high base effect,” ANZ’s junior economist Mustafa Arif and Asia senior strategist Irene Cheung said.
For his part, Capital Economics economist Alex Holmes said that “with inflation set to fall back further and growth only likely to stage a moderate recovery over the coming months, we expect another 25 bp cut before the year is through.”
Expressing pessimism that full-year economic growth would be above 6 percent, given the tough external environment, Holmes pointed out that the impetus to support the economy was likely to remain throughout the rest of the year.
Inflation was likely to fall back further over the coming months, according to him.
“Overall, we are expecting inflation to average just 1.5 percent over the second half of this year, well below the BSP’s 2.0 to 4.0 percent target range,” Holmes said.
Last, Security Bank Corp. Assistant Vice President and chief economist Robert Dan Roces said “stronger external headwinds, such as the protracted US-China trade war, the resulting downside risks to investments and inflation set to fall further, gives scope for another 25 bps cut by yearend to support and sustain growth coming into 2020.”
The Bangko Sentral resumed its monetary policy easing on Thursday by cutting its overnight borrowing, lending and deposit rates to 4.25 percent, 4.75 percent and 3.75 percent, respectively.
Its policy-making Monetary Board also cut its 2019 inflation forecast to 2.6 percent from 2.7 percent, and their 2020 projection to 2.9 percent from 3 percent. They also set a 2.9 percent projection for 2021.
Monetary authorities are set to convene again on September 26 for their sixth rate-setting meeting for 2019.