Monetary Board cuts policy rates

PHILIPPINES - In Brief 26 Sep 2019 by Romeo Bernardo
For the third time this year, the Monetary Board reduced policy rates by 25bp, bringing its key overnight borrowing rate to 4%. The rate cut has been widely anticipated even before the US Fed’s own easing action last week. Hence, analysts are now wondering whether this will be the last rate cut for the BSP this year.When asked, senior BSP officials responded as expected, i.e., future policy action will be data dependent. Based on its statement today, we expect that in its remaining two meetings this year (November 14 and December 12), the BSP will be weighing the risks to growth against risks to inflation. On the economic growth side, what may prompt another rate reduction are more signals and expectations of weakening global growth and slower than expected recovery of domestic growth. 3Q19 GDP data will be released on November 7. Weighed against these are risks to the 2020 inflation outlook. Officials cited price pressures from higher oil prices and related services (electricity and transport fares), increase in excise taxes on alcohol and beverages by January, as well as impact of African Swine Flu on food prices. The BSP’s latest baseline inflation forecast: 2.5% in 2019; 2.9% in 2020 and 21.

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