Rate cut could come sooner than later

The BSP will reduce the policy rate by another 25 basis points to just 4 percent from the current 4.25 percent

Further cuts in the rate at which the Bangko Sentral ng Pilipinas (BSP) borrows from or lends to banks could come “sooner,” BSP Governor Benjamin Diokno said on Friday.

“It might come sooner than later,” he said of the likelihood of another rate adjustment before “November or December to be sure.”

The policy-making Monetary Board is scheduled to meet again on 26 September to decide whether more adjustments are needed still.

Also, this outlook builds on inflation already averaging 1.7 percent in August but expected to show further easing in the coming months.

Previously, Diokno said the BSP will reduce the policy rate by another 25 basis points to just 4 percent from the current 4.25 percent.

On the announced unwinding of the banks’ deposit reserves or the reserve requirement ratio (RRR) could come before, alongside or after the policy rate cut.

“(RRR cut) may come. Our next meeting is on 26 September and we still have a couple of meetings by then. It’s always in the agenda,” Diokno said.

According to him, the Monetary Board has yet to assess the economic situation in full but remain hopeful the positive influences persist down the line.

“We are hoping for a below 2 percent (inflation) again for the next two months because it peaked during September and October last year due to base effects,” the BSP chief said.

“Oil prices continue to go down, electricity prices continue to go down. Food prices are stable and going down in the case of rice so the prospects are bright,” he added.

Various private sector economists earlier projected a 25-basis point policy cut outlook at the 26 September rate-setting meeting to be followed by 100 basis point RRR reduction in the fourth quarter.