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J.P. Morgan: Bangko Sentral to ease monetary policy further

Philstar.com
Benjamin Diokno
This file photo shows Bangko Sentral Governor Benjamin Diokno speaking to reporters at a press conference. More rate cuts are likely on the this year for the Bangko Sentral ng Pilipinas amid external headwinds and on expectations that the US Federal Reserve will slash its benchmark rate, analysts at J.P. Morgan said.
Geremy Pintolo

MANILA, Philippines — More rate cuts are likely on the table this year for the Bangko Sentral ng Pilipinas amid external headwinds and on expectations that the US Federal Reserve will slash its benchmark rate, analysts at J.P. Morgan said.

In a commentary, J.P. Morgan penciled in two cuts in the Fed funds rate by yearend, giving both the cyclically sensitive and rate sensitive central banks enough space to ease monetary policy.

J.P. Morgan said it expects the Fed to trim its key rate by 25 basis points each in September and in December.

“For the Philippines, we make no changes given that we have an existing forecast for two further rate cuts – one at the June 20 monetary board meeting and another in 3Q19,” J.P. Morgan said.

“We note that ASEAN central bank reaction functions tend to be idiosyncratic, with some focused more on growth and inflation - Malaysia, Singapore and Thailand - while Indonesia tends to be sensitive to external conditions,” it added.

Consumer price growth softened to 3% in April on the back of moderate food inflation. Year-to-date, inflation averaged 3.6%, well within the BSP’s 2%-4% annual target.

In a bid to power growth amid cooling inflation and tight liquidity conditions, the BSP in May cut its benchmark rate by 25 basis points to 4.5% from a decade-high of 4.75%, and announced a three-step reduction in bank reserves to 16% from 18%.

The government will release the official inflation data for May on June 6. — Ian Nicolas Cigaral

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