The central bank of the Philippines cut its key interest rate for the fifth time this year, saying "there remains enough policy space for a rate cut "to uplift market sentiment and nurture the country's economic recovery amid increased downside risks to growth."
Bangko Sentral Ng Pilipinas (BSP) cut the rate on its overnight reverse repurchase facility by another 25 basis points to 2.0 percent and has now cut it 200 points this year following earlier cuts in February, March, April and June.
As many other emerging market central banks, BSP began easing its monetary policy stance last year in response to slowing global growth and since it began cutting rates in May 2019, the rate has been cut 8 times and by a total of 275 points.
In addition to the overnight repo rate, BSP also cut the rate on its overnight deposit and lending facilities by 25 basis points to 1.5 percent and 2.5 percent, respectively.
Inflation in the Philippines has remained stable in recent months around 2.5 percent and BSP said it expects the benign inflation environment to continue, with inflation expectations anchored within its target range of 2.0 to 4.0 percent.
This year and up to 2022, BSP expects inflation to settle within the lower half of its range, reflecting slower domestic economic activity, lower global crude oil prices and the recent rise in the peso.
It added the balance of risks to the outlook for inflation remain tilted to the downside due to "potential disruption to domestic and global economic activity amid the ongoing pandemic."
Although domestic output contracted slower than expected in the third quarter, BSP said global economic prospects have moderated in recent weeks amid a resurgence of COVID-19 cases and recent natural calamities could pose strong headwinds to the economic recovery in coming months.
"Given these considerations, the Monetary Board assessed that there remains a critical need for continuing policy support measures to bolster economic activity and boost market confidence," the central bank said.
The Philippine economy expanded by 8 percent in the third quarter from the second quarter.
Bangko Sentral Ng Pilipinas issued the following statement:
"At its meeting on monetary policy today, the Monetary Board decided to cut the interest rate on the BSP’s overnight reverse repurchase facility by 25 basis points to 2.0 percent, effective Friday, 20 November 2020. The interest rates on the overnight deposit and lending facilities were likewise reduced to 1.5 percent and 2.5 percent, respectively.
Latest baseline forecasts continue to indicate a benign inflation environment over the policy horizon, with inflation expectations remaining firmly anchored within the target range of 2-4 percent. Average inflation is seen to settle within the lower half of the target band for 2020 up to 2022, reflecting slower domestic economic activity, lower global crude oil prices, and the recent appreciation of the peso. The balance of risks to the inflation outlook also remains tilted toward the downside owing largely to potential disruptions to domestic and global economic activity amid the ongoing pandemic.
Meanwhile, uncertainty remains elevated amid the resurgence of COVID-19 cases globally. However, the Monetary Board also observed that global economic prospects have moderated in recent weeks. At the same time, the Monetary Board noted that while domestic output contracted at a slower pace in the third quarter of 2020, muted business and household sentiment and the impact of recent natural calamities could pose strong headwinds to the recovery of the economy in the coming months.
Given these considerations, the Monetary Board assessed that there remains a critical need for continuing policy support measures to bolster economic activity and boost market confidence. With a benign inflation environment and stable inflation expectations, the Monetary Board sees enough policy space for a reduction in the policy rate at this time to uplift market sentiment and nurture the country’s economic recovery amid increased downside risks to growth.
Looking ahead, the BSP stands ready to deploy its full arsenal of instruments as needed in fulfillment of its mandate to maintain price and financial stability conducive to sustainable economic growth."
www.CentralBankNews.info
0 comments:
Post a Comment