Philippine central bank to pause after 4 successive rate cuts: Reuters poll

MANILA (Reuters) - The Philippine central bank is widely expected to pause monetary easing on Thursday after four consecutive rate cuts to save ammunition in case the economy, already in a recession, deteriorates further, a Reuters poll showed.

FILE PHOTO: A logo of Bangko Sentral ng Pilipinas (Central Bank of the Philippines) is seen at their main building in Manila, Philippines March 23, 2016. REUTERS/Romeo Ranoco

Thirteen out of 15 institutions surveyed expect the Bangko Sentral ng Pilipinas (BSP) to leave the interest rate on its overnight reverse repurchase facility PHCBIR=ECI steady at a record-low 2.25%.

The two dissenters predicted a fifth cut, possibly by as much as 50 basis points, to breathe life into the country’s economy, which suffered its first recession in 29 years in the second quarter.

“We expect the BSP to keep its policy rate steady for now, preserving its next rate cut for any signs of further economic activity deterioration,” HSBC said in a note.

The BSP has been one of the most aggressive central banks globally in policy easing, slashing its key rate by 175 bps cumulatively this year, to reduce the pandemic’s economic damage.

Some economists expect the BSP to resume cutting the reserve requirement ratio to encourage banks to continue lending to support the economy.

With July inflation at a six-month high of 2.7%, BSP Governor Benjamin Diokno last week hinted the policy rate could remain unchanged for the rest of the year.

But a worsening spread of the coronavirus in the Philippines, which leads in the number of infections in Southeast Asia at close to 170,000 cases, could be a game-changer.

President Rodrigo Duterte on Monday eased a strict lockdown in and around the capital to allow more businesses to reopen, despite warnings from experts that lifting the curbs could lead to a rise in COVID-19 cases.

Capital Economics economist Alex Holmes has pencilled a 50 bps cut before the year ends to make up for “lacklustre” fiscal support from the government.

Reporting by Enrico Dela Cruz and Karen Lema; Editing by Martin Petty