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HSBC: Policy rate cuts unlikely at BSP meeting

June 18, 2019

THE country’s monetary authorities are likely to pause on reducing interest rates at their upcoming meeting on Thursday, according to HSBC.

In a recent report, the banking giant’s Global Economic Team said it expected “the Bangko Sentral ng Pilipinas (BSP) to keep its policy rate steady at 4.50 percent on June 20.”

The central bank started easing its policy rates on May 9 after the policy-making Monetary Board decided to reduce the overnight borrowing, lending and deposit rates by 25 basis points to 4.50 percent, 5 percent and 4 percent, respectively, following a series of rate hikes last year.

“With inflationary risks still tilted to the upside in the near term, we expect the BSP to let its recent policy loosening filter through the economy before engaging in additional rate cuts,” the HSBC economists said.

Also on May 9, the Monetary Board trimmed its inflation forecast to 2.9 percent from 3 percent for this year, but raised it to 3.1 percent from 3 percent for 2020.

The board said then “risks to the inflation outlook remain broadly balanced for 2019 amid risks of a prolonged El Niño episode and higher-than-expected increases in global oil prices.”

For 2020, the risks were said to have “continue to lean toward the downside as weaker global economic activity could temper commodity price pressures,” it added.

Going forward, the HSBC economists said they see scope for further BSP monetary policy loosening in the second half of the year.

“We expect an additional 25bp (basis point) cut to the policy rate and an additional 100bp cut to the RRR (reserve requirement ratio) by yearend, leaving the policy rate at 4.25 percent and the RRR at 15 percent,” they added.

HSBC’s latest report was in line with Monetary Board member Felipe Medalla’s view that the BSP can pause on cutting interest rates, at least until August, on the back of stable inflation.

Credit belongs to : www.manilatimes.net

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