BSP’s ‘surprise’ rate cut lifts peso back to P49:$1 level

The Philippine peso bounced back to P49:$1 level on Friday as investor sentiment got a boost from the central bank’s move to reduce interest rates further.

The local currency gained 8 centavos to close at P49.92:$1 from Thursday’s finish at P50:$1.

“The peso exchange rate closed stronger vs. the US dollar today at 49.92, the strongest in more than two weeks since June 10... after the surprise 0.50-cut in the local policy rates to a new record low of 2.25%,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.

On Thursday, the Bangko Sentral ng Pilipinas’ policy-setting Monetary Board slashed key interest rates by 50 basis points, citing stable inflation outlook moving forward.

BSP Governor Benjamin Diokno said effective Friday, June 26, rates will be at 2.25% for the overnight reverse repurchase (RRP) facility, the overnight deposit facility at 1.75%, and the overnight lending at 3.25%.

The move cuts policy rates to their lowest level in history.

Ricafort said the latest central bank move is seen as a pre-emptive monetary easing measure that could further reduce borrowing costs and further support economic recovery from the COVID-19 lockdowns.

To date, the central bank has reduced interest rates by a total of 175 basis points —25 basis points cut in February and 50 basis points reduction each in March, April, and May.

With its latest move, the BSP has completely unwinded the 175 basis points rate hike it implemented in 2018 to arrest rising inflation.

“Major leads/catalysts for the coming week include the trend in new COVID-19 cases locally and in some countries worldwide especially in some US states amid the recent spike, decision by Malacañang on whether or not to further ease the GCQ in Metro Manila and in other areas that would lead to further re-opening of the local economy,” Ricafort said. —LDF, GMA News