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Philippine Central Bank Chief Says Next Rate Cut May Be in September

Philippine Central Bank Chief Says Next Rate Cut May Be in September

(Bloomberg) -- Philippine central bank Governor Benjamin Diokno sees further easing this year, with another quarter-point cut in the policy rate coming as early as next month.

“We could cut it within the next six weeks -- the next policy meeting -- or could be in the first weeks of the fourth quarter,” Diokno said in an interview with Bloomberg Television’s David Ingles and Tom Mackenzie.

Policy makers may also reduce the ratio of deposits banks must hold in reserve by 100 basis points more this year, the governor said. It may even come before the September 26 policy rate meeting, Diokno told ABS-CBN News Channel separately.

Bangko Sentral ng Pilipinas resumed its easing cycle on Thursday, cutting the key rate as expected by 25 basis points to 4.25%. Policy makers had made phased reductions totaling 200 basis points to the reserve requirement ratio from May to July, as part of Diokno’s goal to bring it below 10% by the end of his term in 2023.

Inflation may average below the central bank’s revised forecast of 2.6% this year on lower oil prices and muted food costs, Diokno said. Bangko Sentral estimates consumer-price gains to settle at 2.9% in 2020 and 2021.

Philippine Central Bank Chief Says Next Rate Cut May Be in September

Central banks across the region are taking stronger steps to counter global economic risks after the Federal Reserve’s rate cut last week gave them room to loosen monetary policy. The Philippines has joined India, New Zealand and Thailand in reducing borrowing costs this week.

The governor said policy makers are closely looking at developments in Asian economies and currencies even as the peso remains among the region’s best-performing currencies.

The peso rose as much as 0.3% against the dollar on Friday morning’s trade, the steepest gain among Asian currencies tracked by Bloomberg.

“Diokno’s practicing what he preached about proper communication to the market,” said Nicholas Mapa, senior economist at ING Groep NV in Manila, adding that the governor “remains data dependent but not date dependent.”

Bangko Sentral will next meet to set the key rate on September 26.

Key Insights:

  • The central bank will look into risks associated with online casinos, specifically on financial stability and the property sector, Diokno told ABS-CBN.
  • “Right now, I don’t think it’s a big part of the economy. It’s good that we look at it at this time so it does not actually blossom into a full-blown source of foreign exchange for the Philippines,” Diokno said of online casinos.
  • A cut in the reserve ratio is always on the table and “the public can expect a cut maybe within the next few weeks” Diokno told ABS-CBN, adding authorities will look at liquidity levels in deciding when to cut.
  • Slow money supply growth was largely due to slowdown in government disbursement in the second quarter following delays in the 2019 budget approval.

--With assistance from Anand Menon, Adrian Wong, Ditas Lopez and Andreo Calonzo.

To contact the reporter on this story: Siegfrid Alegado in Manila at aalegado1@bloomberg.net

To contact the editors responsible for this story: Cecilia Yap at cyap19@bloomberg.net, ;Nasreen Seria at nseria@bloomberg.net, Clarissa Batino

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