Another 50-Basis Point Rate Cut in the Philippines

January 29, 2009

The Central Bank of the Philippines implemented a second 50-bp rate cut today as expected. Along with a similar move on December 18th, four 25-bp hikes between January and August of last year have now been reversed.  The Monetary Board also cut reserve requirements to 8% from 10% back in November.  The central bank lending and deposit rates are now at 5% and 7%, respectively.

A released statement speaks of downwardly biased inflation risks, observing declines in commodity prices, price trend expectations, core CPI, and real aggregate demand.  In-target inflation is predicted for both this year and next. Consumer prices rose 8.0% in the year to December; January price data will be released on February 5th.  Lower interest rates are intended to complement a more expansionary fiscal policy. The statement leaves open the door for more monetary relief, as inflation continues to recede.

Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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