BSP Governor Benjamin Diokno previously said the central bank will impose another 25bps policy rate reduction before the year ends
Further declines in headline inflation should provide the policy space for the Bangko Sentral ng Pilipinas (BSP) to execute another 25-basis point (bps) policy rate cut this year at the 26 September rate-setting meeting of the Monetary Board.
This was learned from various private sector economists who on Thursday noted the moderating inflation and the below-target gross domestic product (GDP) growth as trigger for the central bank to ease the policy levers.
“With inflation careening below the BSP’s own target, we expect the Governor to deliver on his pledge and cut policy rates by an additional 25 bps at the 26 September meeting,” ING Bank senior economist Nicholas Mapa said.
“Monetary easing would also make sense given that second-quarter GDP growth has slid to 5.5 percent, well below the government’s 6 to 7 percent fighting target for the year,” he added.
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Rizal Commercial Banking Corp. lead economist Michael Ricafort bared the same sentiment as he noted the same factors enabling the BSP to implement the anticipated reduction.
According to Ricafort, unwinding the policy rate would help in the “effort to spur greater economic activities and faster GDP growth.”
Also, Union Bank of the Philippines chief economist Carlo Asuncion said the BSP “should do” the rate cut now that credit demand has picked up along with greater liquidity in the financial system.
“Further cuts would be appropriate with the current inflation print and expectations. (I expect) 25bps (reduction) this September meeting,” Asuncion said in a text message.
Meanwhile, Mustafa Arif and Irene Cheung, analysts at ANZ Bank, had a more conservative assessment on the rate cut expected within the last quarter of 2019, similar to HSBC’s economist Noelan Arbis’ outlook.
BSP Governor Benjamin Diokno previously said the central bank will impose another 25bps policy rate reduction before the year ends. He likewise said the banks’ bank deposit reserves will be adjusted soon after although he did not reveal its timing.
