Diokno hints of another rate cut

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to speed up its easing cycle via another interest rate cut “sometime in the middle of the year” to further preempt and ward off potential spillovers associated with external headwinds including the global spread of the 2019 novel coronavirus (nCoV).

BSP Governor Benjamin Diokno said in a television interview with Bloomberg TV monetary authorities have more room after a tightening cycle that saw benchmark rates increase by 175 basis points in 2018.

The benign inflation environment and slower-than-expected economic expansion has allowed the Monetary Board to slash interest rates by 100 basis points since May last year, including the 25-basis point rate cut last Thursday.

“So with this rate cut yesterday (Thursday), we still have a lot of monetary space. The central bank is data dependent, we will look at the past data and our future outlook and we will probably do it maybe sometime in the middle of the year,” Diokno said.

The next rate setting meetings of the Monetary Board are scheduled on March 19, May 21 and June 25.

The BSP chief signaled as early as December a 50-basis point rate cut this year as it pursues an accommodative policy stance.

“I already indicated that we intend to cut rates by 50 basis points this year. So the coronavirus just maybe provided us an opportunity to do it much earlier rather than later,” he said.

Diokno was referring to the global outbreak of the 2019 novel coronavirus that could have a dampening effect on inflation through lower global price of oil.

“We are very comfortable with our inflation situation right now and in fact if you really look at it the coronavirus would have a dampening effect on inflation to the extent that it will affect oil prices. Oil prices are down right now and as an oil importing country that will benefit our country,” he said.

Inflation has accelerated for the third straight month after bottoming out at 0.8 percent in October last year to hit an eight-month high of 2.9 percent in January from 2.5 percent in December and 1.3 percent in November.