THE Monetary Board on Thursday, September 26, decided to cut policy rates further as inflation outlook continued to be benign despite the volatile oil prices and the African Swine Fever (ASF) outbreak.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, in a press conference following the board's regular meeting, said the BSP’s overnight reverse repurchase facility will be reduced further by 25 basis points (bps) to 4.0 percent effective Friday, September 27, 2019.
Interest rates on the overnight deposit and lending facilities will be reduced accordingly to 3.5 percent and 4.5 percent, respectively.
A cut in policy rates is expected to result in lower market rates, encourage lending and stimulate demand.
This is the third rate cut announced by the board since May 9, 2019, when the board first reduced the rates after raising these five times in 2018 by a total of 175 bps in a bid to tame inflation.
Inflation was elevated in 2018, reaching as much as 6.7 percent amid rising prices of food and oil products.
Effective May 10, 2019, the overnight reverse repurchase (RRP) facility, primary monetary policy instrument of the BSP, was reduced by 25 bps to 4.5 percent.
On August 8, 2019, the RRP was cut by another 25 bps to 4.25 percent. The rates on overnight deposit and lending facilities were correspondingly reduced.
Diokno said the board's decision was based on its assessment that price pressures have eased further since the previous meeting.
Their latest baseline forecast is that inflation is likely to settle within the lower half of the target band of 2.0 to 4.0 percent for 2019 up to 2021.
However, Diokno also pointed out that there are still risks to inflation in the near term, mainly from the volatility in oil prices due to the geopolitical tensions in the Middle East and the potential impact of the ASF outbreak on food prices. (MVI/SunStar Philippines)