By Lee C. Chipongian
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the US Federal Reserves’ rate cut will only be one of data that the Monetary Board will take into consideration next week in deciding what to do next.
“The policy decisions of the Monetary Board remain to be data dependent and evidence based. We continue to closely monitor macroeconomic developments, including the recent Fed decision to adjust policy rate by 25 basis points (bps),” said Diokno.
The Monetary Board will have its policy meeting on August 8. Diokno said the Fed rate action will be “one of the inputs in our policy meeting this coming August 8.” The US interest rates was lowered on Wednesday. The last time the Fed cut rates was over a decade ago.
“The Philippines’ growth dynamics and liquidity conditions are markedly different from those of other ASEAN countries,” Diokno added. “Our economy continues to do well (and) the Monetary Board decision next week will be consistent with the BSP’s mandate to maintain stable prices and foster an environment conducive to economic growth.”
Diokno said last week that the central bank will continue to be “patient and prudent” when it comes to decisions on when to cut key rates. He said inflation dynamics are “better-behaved” and the BSP will need to evaluate recent monetary policy actions and its impact on credit, interest rates, and market expectations. The Monetary Board reduced policy rate by 25 bps last May 9 and also lowered reserve requirement ratio (RRR) by 200 bps by end-July.
The BSP’s 2019 inflation forecast was recently reduced to 2.7 percent from 2.9 percent earlier, and for 2020 it’s three percent from the previous 3.1 percent estimate.
Based on the minutes of the June 20 Monetary Board policy meeting, projections were reduced due to the sharp decline in global crude oil prices and the peso appreciation, which it said “offset the faster liquidity growth resulting from the downward adjustments in the policy rate and reserve requirements.”