BANGKO SENTRAL ng Pilipinas (BSP) Governor Benjamin E. Diokno said they will not go for an off-cycle rate cut following the US Federal Reserve’s surprise move to ease as part of efforts to boost the economy amid risks of a slowdown due to the coronavirus disease 2019 (COVID-19) outbreak.
“The emergency half-point cut by the Fed matters. The fast-spreading COVID-19 and its likelihood of slowing global growth matters,” Mr. Diokno said in a text message on Wednesday night.
“One thing is certain: there will be no off-cycle MB (Monetary Board) move to cut policy rates,” he added.
The Fed on Tuesday cut rates by 50 basis points (bps) to a target range of 1% to 1.25% in an unscheduled meeting as the spread of the virus led to a change in the US central bank’s growth outlook, even as Fed Chair Jerome Powell said the economy remains strong.
The Fed last implemented a 50-bp cut in 2008.
Meanwhile, the BSP Monetary Board on Feb. 6 — its first meeting for the year — already cut rates by 25 bps as a “preemptive move” as COVID-19 caused fears of a possible economic slowdown in financial markets. This followed the 75 bps worth of cuts done in 2019.
The rates on the BSP’s reverse repurchase, overnight lending and deposit facilities now stand at 3.75%, 4.25%, and 3.25%, respectively.
Mr. Diokno said earlier this week another 25-bp cut is still on the table for the year, adding that they will assess anew the impact of the virus on the economy during the Monetary Board’s next policy-setting meeting on March 19. He also said last week that the central bank is not ruling out reductions worth 50 to 75 bps.
“The February inflation matters and so with the inflation prospects for the year. All these and more will serve as inputs to the MB’s decision on March 19,” Mr. Diokno said yesterday.
The Philippine Statistics Authority reported on Thursday that headline inflation slowed to 2.6% in February from 2.9% the prior month on the back of easing food, transport, and utility prices.
This result is closer to the lower end of the 2.4-3.2% estimate range given by the BSP Department of Economic Research on Friday last week.
This also compares to the three percent inflation estimate from a BusinessWorld poll of 17 economists held last week, which matches the central bank’s forecast average for the year.
The BSP wants inflation to settle within 2-4% this year.
Socioeconomic Planning Secretary Ernesto M. Pernia has said the virus could shave as much as one percentage point off full-year gross domestic product (GDP) growth if the outbreak continues until the end of the year.
The government targets GDP growth of 6.5-7.5% this year. — L.W.T. Noble