UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the recent decision by the central bank of the Philippines (BSP).
“During its scheduled monetary policy meeting yesterday, Bangko Sentral ng Pilipinas (BSP) cut its overnight reverse repurchase (RRP) rate by 50bps to a new low of 2.25%. Accordingly, both the overnight lending and deposit rates were also reduced to 2.75% and 1.75% respectively.”
“After reopening parts of the economy in early June, the government has tightened back the lockdown in Cebu city and Manila amid increasing number of COVID-19 infections. The IMF expects Philippines GDP to decline 3.6% in 2020 (vs. its April estimate of -0.6%). This is in line with our expectations for the economy to suffer its deepest annual contraction since 1985 this year, at -3.5% (official forecast: -2.0% to -3.4%).”
“Inflation remains benign as the pandemic effect weakens demand. Headline CPI rose 2.1% in May, continuing a decelerating trend from 2.9% at the start of the year. The latest forecasts indicate that inflation is likely to settle near the low end of BSP’s 2%-4% target range for 2020 up to 2022.”
“Year-to-date, BSP has cumulatively reduced its RRP rate by 175bps and reserve requirement ratio (RRR) by 200bps. BSP Governor had earlier hinted that the central bank was content with the degree of monetary easing done to support the economy. However, with the continued rise in coronavirus infections and reinstatement of lockdowns, the pace of recovery is likely to be much slower-than-expected. Given real interest rates inching closer to zero, BSP has limited room to ease policy rates further albeit officials see room to accelerate the RRR cuts.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.