Philippine CB Cuts Rate For Second Time In A Row
September 26 2019 - 4:19AM
RTTF2
The Philippine central bank slashed its key interest rate by a
quarter-point for a second consecutive session, and a third time
thus far this year, as inflation slowed to its weakest level in
nearly three years amid weak economic growth.
The Monetary Board of the Bangko Sentral ng Pilippinas, or BSP,
on Thursday decided to lower the overnight reverse repurchase
facility rate by 25 basis points to 4.00 percent. The move was in
line with economists' expectations.
The previous change in the rate was a quarter-point reduction in
August, after a surprise similar size cut in May, which was the
first since 2016.
Late August, BSP Governor Benjamin Diokno had signaled that the
rate will be cut by another quarter-point before the end of this
year.
However, Alex Holmes, an economist at Capital Economics, expects
more cuts in coming quarters with growth likely to disappoint and
subdued price pressures. The economist forecast two rate cuts, that
will take the policy rate to 3.50 percent.
The central bank expects inflation to settle within the lower
half of the target range of 2-4 percent until 2021. The balance of
risks to the inflation outlook shifted toward the upside for 2020
and tilted to the downside for 2021.
The bank had earlier lowered its inflation forecast for 2019 to
2.5 percent from 2.6 percent.
The board viewed that prospects for global economic growth are
likely to remain weak owing mainly to uncertainty over trade
policies. Nonetheless, firm domestic spending and progress on
policy reforms will serve as a buffer against global headwinds.
The economy had expanded 5.5 percent in the second quarter,
which was the weakest growth in four years. The government targets
6-7 percent growth for this year.
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