Think tank sees 50 bps BSP rate cut this year
Czeriza Valencia (The Philippine Star) - February 10, 2019 - 12:00am

MANILA, Philippines — As inflation continues to ease and the monetary policy hike cycle seems to have ended, the Bangko Sentral ng Pilipinas (BSP) is seen to eventually unwind some of last year’s tightening by as much as 50 basis points within the year, said London-based think tank Capital Economics.

In an updated response to BSP’s policy rate hold on Thursday, the macroeconomy research firm said the central bank is expected to eventually provide support to the slowing economy, beginning with a 25 bps rate cut in May and ending 2019 with a total rate cut of 50 bps. 

“With inflation set to continue falling over the coming months and growth likely to undershoot expectations, we think BSP’s next adjustment to policy will be a cut,” said

“We have pencilled in the first 25 bps rate cut at the BSP’s meeting scheduled for the May 9, and expect a total 50 bps of loosening by end-2019,” it added.

The firm expects economic growth to struggle for momentum this year, getting stuck at around six percent this year after the slowdown of 6.2 percent in 2018 and 6.1 percent in the fourth quarter, both of which were well below the revised government target of 6.5 percent to 6.9 percent for the year.

“We expect growth to remain stuck at around six percent this year, which is well-below the government’s seven to eight percent target,” said Capital Economics.

The firm expects inflation to continue falling back over the coming months as food prices moderate further.

The law liberalizing the importation of rice awaits President Duterte’s signature but is likely to be passed soon.

Once enacted into law, lower rice prices can shave 0.85 percentage point off the headline inflation rate.

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