BSP to ‘go slow’ in cutting interest rates in 2020 — Diokno
MANILA, Philippines — Monetary authorities will go easy on cutting interest rates this year as the economy is in a “very nice place” right now, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Monday, adding that the central bank still has “a lot of room” to ease monetary policy.
Ahead of the monetary board's first meeting for the year on February 6, Diokno told ANC Television that the BSP won’t be as aggressive as last year in slashing policy rates in 2020, citing benign inflation, low unemployment rate and an economy that he expects to grow 6.5%-7% this year.
“Maybe not as aggressive as last year because we are in a very nice place right now,” the central bank chief said.
“We’ll go slow in our monetary easing,” he added.
The Philippine economy grew 5.9% in 2019, missing the government's 6%-6.5% goal for the year after the delayed approval of the national budget disrupted state spending. The latest full-year print snapped the seven-year above 6% growth streak and was the slowest pace since 2011’s 3.7%.
Meanwhile, inflation quickened in the last two months of 2019 and averaged 2.5%, settling within the government’s 2%-4% annual target.
Banks typically use the BSP's benchmark rate as basis when charging loans to consumers and businesses. Lower borrowing costs encourage bank lending activity which, in turn, fuels economic growth.
Since becoming governor, Diokno — who is widely seen by the market as a pro-growth central bank chief — has given the economy a shot in the arm with a cumulative 75-basis point rate cut in 2019 and a 400-basis point reduction in bank reserves.
Diokno had 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 near-decade high in September and October.
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