Bangko Sentral opens 2020 with policy rate cut

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) decided to cut key policy rates during its first policy-setting meeting for the year on Thursday.

The central bank's policy-setting board reduced rates to bring the overnight borrowing rate to 3.75%, the overnight lending to 4.25%, and the overnight deposit to 3.25%.

"Latest baseline forecasts indicate a broadly steady path of inflation for 2020 and 2021, with average inflation remaining within the target range of 3.0% ± 1 percentage point," BSP Governor Benjamin Diokno said in a press conference in Manila City.

"Inflation expectations also continue to be firmly anchored within the target over the policy horizon," he told reporters.

According to the BSP, it now expects inflation to settle at 3.0% this year, higher than the earlier announced outlook of 2.9%.

"Upside risks to inflation over the neat term emanate mainly from potential upward pressures on food prices owing in part to the African Swine Fever outbreak and tighter international supply of rice," said Diokno.

The Department of Agriculture (DA) has already placed eight barangays of Don Marcelino in Davao Occidental on lockdown to prevent the spread of ASF.

"Moreover, there continues to be the burden on the economy posed by the ongoing Taal volcano eruption and the aftermath of Typhoon Tisoy," Diokno said.

"However, uncertainty over trade and economic policies in major economies continue to weigh down on global demand, thus, mitigating upward pressures on commodity prices," he elaborated.

According to Diokno, the preemptive reduction will support market confidence, and provide additional policy support to address external headwinds.

"While recent demand indicators still point to a firm outlook for the domestic economy, the Monetary Board believes that a policy rate cut would provide additional policy support to ward off the potential spillovers associated with increased external headwinds," he said.

"Going forward, the BSP will remain watchful over emerging price and output conditions to ensure that monetary policy settings remain consistent with price stability while supporting sustained non-inflationary growth over the medium term," he added.—LDF, GMA News