Philippines central bank to join drive to cut rates: Reuters poll

Philippines central bank to join drive to cut rates: Reuters poll

© Reuters. Philippines central bank to join drive to cut rates: Reuters poll© Reuters. Philippines central bank to join drive to cut rates: Reuters poll

MANILA (Reuters) – The Philippine central bank looks certain to slash interest rates at its meeting on Thursday to counter the economic impact of the coronavirus outbreak, and the only remaining question is how deep the cut would be.

Nine out of 13 economists in a Reuters poll expected the central bank to cut policy rates by 25 basis points to 3.50%, which would be the fifth such cut since policymakers began reversing policy rate hikes in 2018 to bolster the economy.

But the rest believed the central bank would opt for a bigger 50 bps rate reduction after the Federal Reserve’s emergency move on Sunday to slash rates to near zero.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno hinted at that possibility, saying on Monday policymakers might consider a half-percentage-point cut given the worsening coronavirus disruptions, collapse in oil prices and policy easing by major central banks.

With the inflation outlook seen remaining favorable, the central bank has room to continue reversing rate hikes totaling 175 basis points in 2018.

“Diokno will likely need to accelerate his bid to unwind the 2018 rate hikes to bring out all the heavy artillery with a likely 50 bps rate reduction,” ING economist Nicholas Mapa said, adding a 75 bps cut could not be ruled out.

Mapa said the central bank may also inject additional liquidity by reducing tenders for its term deposit facilities or reserve requirements.

The Philippines suspended its financial markets on Tuesday, the first trading shutdown in a world grappling to contain the coronavirus outbreak, described by the World Health Organization as a pandemic.

The Philippines was also the first in the region to take drastic measures to tackle the spread, with President Rodrigo Duterte calling it “the fight of our lives”, after deeming existing curbs on movement and gatherings insufficient to quell the contagion.

In just 10 days, the country’s coronavirus cases climbed to 142 from three, with 12 deaths.

Around the world, more than 7,160 deaths have been linked to coronavirus across 163 countries and territories, according to a Reuters tally based on official statements.

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