By Luz Wendy T. Noble
BANGKO SENTRAL ng Pilipinas (BSP) Governor Benjamin E. Diokno on Monday said they may consider a 50-basis point (bp) policy rate cut at its meeting on Thursday, after the US Federal Reserve’s emergency rate cut triggered policy easing by other central banks as they try to soften the blow of the coronavirus disease 2019 (COVID-19) to the global economy.
“In light of the synchronized global monetary easing, collapse of the world oil prices, worsening COVID-19 breakout, slowing global economy, muted inflation and inflation expectation, BSP might consider a deeper cut, say 50 bps,” he said in a text message on Monday.
The overnight reverse repurchase rate of the central bank is currently at 3.75% while overnight lending and deposit rates are at 4.25% and 3.25%, respectively.
However, Mr. Diokno ruled out the possibility of an “off-cycle meeting” just like what some analysts have earlier expected after the Fed did two rounds of emergency rate easing in March.
“There will be no off-cycle meeting. The MB will meet as scheduled on Thursday,” he said.
A BusinessWorld poll held last week saw 12 out of thirteen economists expecting at least a 25-bp rate reduction at this Thursday’s meeting. Of the 12, three economists did not rule out the possibility of a 50-bp cut, while two said they see 50-bp cut.
However, following Fed’s decision to cut rates, some economists have priced in 50 bps worth of cuts from the BSP as well as some additional liquidity measures in the form of reduction in reserve requirement ratio (RRR) for banks.
“In light of the Fed move, we expect Diokno to front load his policy action and we revise our expectation for Thursday’s meeting for at least a 50 bps rate cut and a possible announcement for additional liquidity via a reduction in reserve requirement or a lowering of the volume for its term deposit facilities,” ING Bank NV-Manila Senior Economist Nicholas Antonio T. Mapa said.
Security Bank Corp. Chief Economist Robert Dan J. Roces is also of the view that the BSP will go for a 50-bp rate cut and the probability of about 100 bps worth of RRR reduction.
Currently, RRR for big banks, thrift, and rural lenders are at 14%, four percent, and three percent, respectively.
“The Philippines has ample monetary space to do this, but a policy mix that’s heavier on fiscal policies should do the trick in containing any economic fallout,” he said in a note sent to reporters on Monday.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion is also pushing for a fiscal response as a way to shield the economy from the impact of the COVID-19 outbreak.
“The P108-billion fiscal stimulus proposal authored by [Marikina] Representative Stella [Luz A.] Quimbo is very much needed. Coordinated efforts by appropriate institutions is very critical and crucial at this time,” he said in an e-mailed response.
Ms. Quimbo filed a bill on Thursday which looks to set aside a P108 billion for a stimulus package amid the economic damages of the outbreak.
Under the bill, P43 billion will be used to assist the tourism sector, P15 billion for displaced workers “including but not limited to emergency employment assistance and transportation vouchers,” and P50 billion will go to assistance to businesses, including loan packages and subsidies.
With the virus triggering a lockdown and hurting sectors including tourism and trade among others, some analysts have pointed out that the country’s growth prospects of 6.5% to 7.5% this year could be out of reach.