First Filipino Interest Rate Cut Since July 2009

January 19, 2012

The Monetary Board at Bangko Sentral ng Pilipinas cut its key overnight borrowing and lending rates by 25 basis points to 4.25% and 6.25%, respectively.  A statement from central bank officials first projected that CPI inflation this year would settled into the lower half of a 3-5% target range and also observed that "the Euro area economy is notably weaker with interlocking sovereign debt and banking problems weighing down on global sentiment."  They expect today’s first monetary easing in 2-1/2 years to promote domestic spending and compensate for external headwinds. 

The authorities had begun raising interest rates later than many other Asia central banks, implementing a first 25-bp rate hike in March 2011 and a follow-up second time in May.  No subsequent changes were made until then.  In the Great Recession, the benchmark borrowing rate was reduced six times between December 2008 and July 2009 by a total of 200 basis points to 4.0% from 6.0%.

The second Monetary Board interest rate-setting meeting of 2012 is scheduled for March 1.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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