Bangko Sentral to pause before easing again in 2020 — Fitch unit
MANILA, Philippines — The Bangko Sentral ng Pilipinas will likely pause its easing cycle before cutting interest rates again in 2020, a Fitch unit said Friday.
The BSP on Thursday slashed its benchmark rate for the third time this year by 25 basis points to 4% amid benign inflation and sluggish economic growth.
In a research note, Fitch Solutions said the next rate cut will likely come in 2020. If realized, this would bring the key rate to 3.75% next year.
But Fitch Solutions said there is still a “high” possibility that another round of policy rate reduction could happen before the end of 2019, “with trade tensions unlikely to improve and inflationary base effects to result in subdued Q4 price growth readings.”
“For now we believe the BSP will take a ‘wait and see’ approach through its last two meetings in 2019,” the Fitch unit said.
Banks typically use the BSP's key rate as basis on charging their loans to consumers.
Lower interest rates encourage bank lending, injecting more money to the country’s financial system which, in turn, supports economic expansion.
The Philippine economy expanded 5.5% in the second quarter, weaker than 5.6% recorded in the preceding three months after the delayed approval of the 2019 budget disrupted state spending.
Meanwhile, inflation eased further to 1.7% in August — the slowest rate in three years.
BSP Governor Benjamin Diokno earlier said it was logical for the central bank to dial back the 175-basis point cumulative hikes fired off in 2018, which saw inflation peak at a nine-year high in September and October.
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