Citi sees BSP cutting SDA rate to 1%

Citibank's Citi Research Emerging Markets Macro Strategy and Outlook expects the Bangko Sentral ng Pilipinas to lower the interest rate on special deposit accounts (SDA) again, this time to somewhere in the 1- to 2-percent range. The SDA is a facility of the central bank used to mop up liquidity in the financial system. In its most recent research note, Citi said the BSP may cut the SDA rate from the current 2.5 percent over the short term to temper foreign exchange inflows, which have been growing due to robust remittances, foreign investments and foreign portfolio investments. “If [Japanese yen] weakness will not stand in the way of a strong peso, BSP will be compelled to undertake macro prudential responses led by SDA rate cuts—likely down to the range of 1 to 2 percent,” Citi said. In January, monetary authorities rationalized SDA rates to 3.0 percent from a price that was at a premium over policy rates. On March 14, the BSP cut SDA rates by 50 basis points to 2.5 percent across all tenors. — BM, GMA News