THE Philippine central bank may cut the key rate by another 25 basis points (bps) as early as the second quarter to shield the economy from the effects of a deadly coronavirus outbreak, according to its chief.
Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno told reporters on Friday the outbreak that has killed more than a thousand and sickened tens of thousands more in China was an economic risk.
The policy-making Monetary Board might enforce the rate cut next quarter if the health menace takes a bigger toll on the country’s growth than what economic managers had expected, he said.
“Our target is maybe second quarter or second half of the year,” Mr. Diokno said.
“At the moment, I don’t see the need for monetary easing other than what we have done,” he said. “We are happy where we are right now.”
BSP cut benchmark interest rates on Feb. 6 to take advantage of slower price increases and shield the economy from the effects of a deadly coronavirus outbreak.
The Monetary Board cut the key rate by 25 bps to 3.75% at its first policy meeting of the year, in line with market expectations.
Mr. Diokno at that time said the spread of the virus could affect economic activity and market sentiment in the coming months.
The manageable inflation environment “allowed room for a preemptive reduction in the policy rate to support market confidence,” he said.
The decision followed 75 bps of rate cuts last year and 175 bps of rate increases in 2018 amid a high inflation environment.
January inflation picked up more than expected to an eight-month peak of 2.9%, but it was still within the central bank’s comfort range.
The rate was faster than 2.5% in December but slower than 4.4% in January 2019, according to data from the Philippine Statistics Authority.
It was still within the central bank’s 2-4% target for the year.
Mr. Diokno said BSP would opt to use traditional monetary policy tools if the need arises.
“We can tap the traditional rate cuts or reserve requirements,” he said. “We don’t need to resort to other measures.”
The Monetary Board’s next policy meeting is on Mar. 19. It will also hold policy meetings on May 21 and June 25. — Luz Wendy T. Noble