Philippine Central Bank Lowers Rate For First Time Since 2020
2024-08-08
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(fxcue news) - The Philippine central bank unexpectedly lowered its benchmark rates for the first time in nearly four years and hinted at more easing amid well-anchored inflation expectations.
The monetary board of the Bangko Sentral ng Pilipinas governed by Eli Remolona reduced the target reserve repurchase rate by 25 basis points to 6.25 percent. Markets were expecting a hold.
Accordingly, the interest rates on the overnight deposit and lending facilities were lowered to 5.75 percent and 6.75 percent, respectively.
This was the first reduction since November 2020. The bank has raised its benchmark rate by 450 basis points since May 2022 in order to counter inflationary pressures.
"With inflation on a target-consistent path, the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance," the bank said in a statement.
Despite an uptick in July, headline inflation is expected to trend downward to the 2-4 percent target range, the bank noted.
Further, the bank said the balance of risks to the inflation outlook continues to lean toward the downside for 2024 and 2025 with a modest tilt to the upside for 2026.
The bank today raised its risk-adjusted inflation forecast for 2024 to 3.3 percent from 3.1 percent, while that for 2025 was downgraded to 2.9 percent from 3.1 percent.
With inflation set to drop back further and growth likely to struggle, another 50 basis points of cuts are likely before the end of the year, Capital Economics' economist Gareth Leather said.
Data released last week showed that the economy grew at a faster pace of 6.3 percent year-on-year after expanding by revised 5.8 percent in the first quarter.
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