BSP has more room to cut rates
Lawrence Agcaoili (The Philippine Star) - April 8, 2020 - 12:00am

MANILA, Philippines — The expected easing of inflation over the next few months due to soft global oil prices  will give the Bangko Sentral ng Pilipinas more room to cut interest rates to boost economic activity amid the coronavirus disease 2019 or COVID-19 outbreak, according to BSP Governor Benjamin Diokno.

Diokno said inflation may ease further this month after slowing down to 2.5 percent in March from 2.6 percent in February.

Diokno attributed the expected decline in April inflation to the collapse of world oil prices, the zero or near zero increase in utility rates as well as the price freeze on basic necessities due to the outbreak.

Global oil prices dropped to $22.51 per barrel from a high $85 per barrel in 2018, while food prices remained stable due to ample supply and the price freeze imposed on basic commodities after President Duterte issued Proclamation 922 last month declaring a state of public health emergency due to the coronavirus outbreak.

The latest inflation figure was within the BSP’s forecast range of two to 2.8 percent and is consistent with the prevailing assessment that inflation is expected to be benign over the policy horizon due to the potential adverse impact of COVID-19 on the domestic and global economic environment.

Inflation averaged 2.7 percent in the first quarter, well within the BSP’s two to four percent target.

“With this development, this gives BSP more room for monetary easing,” Diokno said.

The BSP has so far slashed interest rates by 75 basis points this year to boost market confidence and ward off potential spillovers from external headwinds, including the COVID-19 pandemic.

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