Another policy cut possible – Diokno

The likelihood of another reduction on the rate at which the Bangko Sentral ng Pilipinas (BSP) lends to and borrows from banks is still on, BSP Governor Benjamin Diokno affirmed on Monday.

“Yes, that is possible (but) the BSP will always be data dependent so we will evaluate,” Diokno told reporters on the sidelines of the Financial Education Stakeholders Expo in Pasay City.

According to him, a reduction must be executed carefully given its possible repercussions in the financial system if done hastily.

“Usually, if you’re doing some reforms, you should do it gradually, so you can monitor its development. That’s the suggested move because if we (cut) drastically, it might be disruptive (to the system),” the BSP chief explained.

“(Also), we are not desperate. In fact, our policy right now is appropriate for where we want to be… there is no rush but we will be data dependent,” he added.

Earlier, sovereign debt watcher S&P Global Ratings eyed another cut in the BSP’s key policy rates by way of 25 basis points, bringing total reductions for the year at 100 basis points.

S&P Primary Credit Analyst Nikita Anand said that the recent cuts executed by the BSP for its key policy rates have done a good job in supporting the profitability of the banking sector. While at it, they forecast another reduction by way of 25 basis points.

“The central bank has cut policy rate by 75 basis points so far in 2019, and we expect another 25 bps rate cut later this year. This should bring the overnight reverse repurchase rate to 3.75 percent,” Anand said.

Likewise, the analyst pegged a similar aggressive stance to be executed by the BSP in 2020, reversing the salvo of rate hikes implemented in 2018.