Philippines: Central Bank keeps rates unchanged in August
At its 20 August monetary policy meeting, the Central Bank of the Philippines (BSP) decided to leave the overnight reverse repurchase facility at 2.25%. Accordingly, the overnight deposit facility and the overnight lending facility rates—which establish the floor and the ceiling of the interest rate corridor—were kept stable at 1.75% and 2.75%, respectively. This came after four consecutive rate cuts earlier this year to buttress the economy.
The decision to stay put was likely driven by a desire to take stock of past easing, as rates are already at record lows. As the BSP stated in its press release: “A prudent pause will enable the cumulative 175-basis-point reduction in the policy rate as well as other monetary and regulatory relief measures by the BSP to fully work their way through the economy.”
The Bank did not give explicit guidance on the direction of monetary policy going forward, but reiterated it “remains committed to deploying its full range of monetary instruments and regulatory relief measures as needed”. Our panelists are split: while several see rates unchanged through end-2020, others see additional easing to spur activity.
Nicholas Mapa, senior economist at ING, is among the analysts who see rates unchanged:
“Monetary authorities will likely hold off on further rate cuts in 2020 and look to fiscal stimulus to complement the flurry of moves from the BSP to jump start economic growth.”
Makoto Tsuchiya, economist at Oxford Economics, has a different view:
“Barring an unexpected shock to inflation, the BSP is likely to loosen monetary policy further through both RRR and policy rate cuts in order to provide more support to the economy.”