Philippine central bank chief says more rate cuts on the table

[MANILA] Philippine central bank governor Eli Remolona said “a few more rate cuts” are on the table in the absence of any economic surprises.

“With inflation on track – more or less on track – we stay with baby steps, which means 25 basis points at a time,” Remolona said on Tuesday (Mar 11). He said a bigger rate cut may be warranted in case of an unlikely “hard landing”.

The Bangko Sentral ng Pilipinas in February surprisingly halted cutting interest rates, after Philippine economic growth missed the government’s target and as policymakers weigh the impact of rising global uncertainties.

The monetary authority instead decided to reduce the amount lenders must set aside as reserves to bring down financial intermediation costs. Effective Mar 28, banks’ reserve requirement ratio will fall to 5 per cent from 7 per cent which, according to one analyst’s estimate, will release at least 300 billion pesos (S$7 billion) into the financial system.

Remolona said the reserve ratio at 5 per cent remains high, suggesting further reduction.

An interest rate cut will be considered at the next policy meeting now scheduled for Apr 10, taking into account the latest economic data. Philippine inflation slowed sharply to 2.1 per cent in February, lower than the central bank’s target range. March inflation report is due on Apr 4.

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Monetary authorities are monitoring the peso’s exchange rate against the dollar because of the impact on inflation, Remolona said. “It’s a balancing act between inflation and growth,” he said. BLOOMBERG