Bangko Sentral lowers interest rates by another 25 basis points

The Bangko Sentral ng Pilipinas (BSP) on Thursday eased policy rates anew, marking the third round of monetary easing so far this year.

The policy-setting Monetary Board decided to cut rates by another 25 basis points to bring the overnight borrowing rate to 4.00%, the overnight lending to 4.50%, and the overnight deposit rate to 3.50%, BSP Governor Benjamin Diokno said during a press conference.

“The Monetary Board’s decision is based on its assessment that price pressures have eased further since the previous meeting,” he told reporters in Manila City.

“Inflation expectations also remain well-anchored within the inflation target range based on the BSP’s survey of private-sector economists.”

The BSP now expects inflation to settle at 2.5%, lower than the earlier outlook of 2.6%, but still within the government target of 2% to 4%.

“In the near term, inflation could continue to be settling and reach the low end of the target range until November 2019 due primarily to base effects as oil and rice prices peaked at the same period in 2018,” said BSP Assistant Governor Edna Villa.

Inflation surged to 6.7% in September 2018, marking a fresh nine-year high. It then eased to 6% in November the same year.

For 2020 and 2021, the BSP retained its inflation outlook of 2.9%.

“The Monetary Board also noted that the balance of risks to the inflation outlook have shifted toward the upside for 2020, while it is seen to tilt to the downside for 2021,” said Diokno.

Among the upside risks cited by Diokno are the volatility in oil prices due to geopolitical tensions in the Middle East, as well as the potential impact of the African Swine Fever outbreak on food prices.

The downside risks include the subdued pace of the global economy.

“Given these considerations, the Monetary Board believes that the benign inflation outlook provides room for a further reduction in the policy rate to support economic growth and reinforce market confidence,” said Diokno.

“Going forward, the BSP will continue to monitor emerging price and output developments to ensure that monetary policy settings remain consistent with price stability while being supportive of sustained non-inflationary economic growth over the medium term,” he said.

BSP Department of Economic Research Director Dennis Lapid said the board will continue to await economic data such as the third-quarter economic growth, and the updates on the World Economic Outlook of the International Monetary Fund (IMF).

“We have two more meetings for the rest of the year and we will look at the data,” he said during the same press conference.

The MB has two more policy meetings for the year—November 14, and December 12.

Earlier this year, the board reduced benchmark interest rates by a cumulative total of 50 basis points —25 basis points each during its May 9 and August 8 meetings. —VDS, GMA News