THE Philippine central bank might further cut benchmark interest rates next year as the economy continues to pick up amid global conditions, according to Leong Sook Mei, Association of Southeast Asian Nations head of Global Markets Research at MItsubishi UFJ Financial Corp.
“There are still expectations that possibly you may get one more rate cut, but I think we need to see how the trade war pens up,” she said at a briefing on Friday.
Ms. Leong said the central bank has been very transparent about its direction, citing Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno’s recent remarks.
She noted that Mr. Diokno had said that they were done with rate cuts this year. The BSP chief has told ABS-CBN News Channel and Bloomberg that it would pause monetary easing this year because it has “done enough” for the economy.
Ms. Leong said she expects a barrage of cuts in the reserve requirement ratio next year since the Philippine level is still higher than in other countries.
“It’s very clear as well that next year, there will be more reserve requirement cuts,” she said, possibly by 300 basis points.
The BSP aims to cut the reserve level to a single digit “because14% is still very, very high,” she said.
The BSP’s Monetary Board cut benchmark interest rates by 25 basis points (bps) for the third time in September, in the face of continued easing of price pressures and given the need to spur the economy.
Policy rate cuts this year have totaled 75 bps, lower than the 175 bps tightening done last year amid a high inflation environment.
The latest monetary policy move slashed rates for the overnight reverse repurchase facility, as well as overnight deposit and lending to 4%, 3.5% and 4.5% respectively.
Meanwhile, the latest reserve requirement announcement in late October will cut banks’ reserve requirement by the first week of December to 14% for commercial banks and 4% for thrift banks. The level for rural banks was unchanged at 3%. — Luz Wendy T. Noble