MANILA – Fitch Solutions projects at least 50 basis points additional reduction in the Bangko Sentral ng Pilipinas’ (BSP) key rates this 2020 to help lift the economy from the impact of the global pandemic.
“On the monetary side, easing inflationary pressures and the peso exchange rate’s stability offers further scope for easing and we forecast a minimum of an additional 50 bps of cuts to the key policy rate by year-end, which would take the key policy rate to 2.25 percent,” the unit of Fitch Group said in a report.
To date, the central bank’s overnight reverse repurchase (RRP) rate is at 2.75 percent, the overnight lending rate is at 3.25 percent, and the overnight deposit rate is at 2.25 percent.
Since the start of the year, the BSP’s policy-making Monetary Board (MB) has cut the central bank’s key rates by a total of 1.25 basis points as inflation continues to decelerate and the need to help buoy the economy increases amid the coronavirus disease 2019 (Covid-19).
The rate reduction is expected following a total of 175-basis-point hike from May 2018 until August 2019 due to the rise of domestic inflation rate brought about by supply-side factors, but the speed of the cuts is unexpected.
BSP Governor Benjamin Diokno has repeatedly indicated openness to implement more rate cuts or the use of other options in the central bank’s toolkit to help address the impact of the pandemic.
Monetary officials forecast inflation to average at 2 percent this year, the lower end of the government’s 2 to 4-percent target until 2020, while the projected average inflation rate next year is 2.45 percent. (PNA)
