February 27, 2020 / 8:45 AM / a month ago

UPDATE 1-As coronovirus fallout deepens, Philippine c.bank says may consider more rate cuts

* Central bank committed to another 25 bps cut this year

* Growth may hit 6.0% this year

* Inflation may slow due to lower oil prices (Adds more quotes, background)

MANILA, Feb 27 (Reuters) - The Philippine central bank will consider more cuts in its key policy rate and banks’ required reserves if the economic impact from the coronavirus epidemic is likely to be much worse than expected, its governor said on Thursday.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said he remains committed to cutting interest rates by another 25 basis points this year after the quarter-point cut in February that brought the policy rate to 3.75%

But “if things deteriorate much beyond what we have originally forecasted, we might consider additional cuts in reserve requirements or policy rate,” Diokno told reporters.

The central bank previously estimated the virus outbreak could shave up to 0.2 percentage points off first quarter growth and 0.4 percentage points off second quarter growth, but Diokno said the forecasts are now being reviewed.

“We realised that the analysis that we did earlier may not be appropriate anymore given” the epidemic has taken more of a sinister twist, Diokno said.

The central bank cut its interest rates on Feb. 6, the fourth such move since it began unwinding the 2018 policy rate hikes totalling 175 basis points last year, to support growth.

It also cut banks’ reserve requirement ratio (RRR) by a total 400 bps last year to 14%.

With inflation expected to slow due to lower oil prices and as consumers spend less on travel and tourism due to the virus scare, the central bank has policy space to support economic activity if needed, Diokno added.

He said growth will probably hit 6.0% this year, below this year’s 6.5%-7.5% growth target.

Reporting by Neil Jerome Morales Writing by Karen Lema Editing by Shri Navaratnam

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