BSP cuts key interest rate by 25 basis points

The Bangko Sentral ng Pilipinas (BSP) has cut its benchmark interest rate by 25 basis points to 3.75 percent, with the overnight lending and deposit facilities adjusted to 4.25 percent and 3.25 percent, respectively.

This move aligns with market expectations and signals the BSP's intent to continue easing its policy stance as a pro-growth measure.

The BSP revised its 2020 inflation forecast higher to 3 percent from 2.9 percent but maintained the 2021 estimate at 2.9 percent.

BSP Governor Benjamin Diokno stated that the manageable inflation environment allowed for a preemptive rate reduction to support market confidence and cited potential spillovers from increased external headwinds, including the novel coronavirus outbreak, as reasons for the policy cut.

Diokno noted that risks to the inflation outlook are slightly tilted to the upside for this year, primarily due to the African Swine Fever outbreak and rice supply issues.

Despite domestic challenges like the Taal Volcano eruption and typhoon aftermath, the BSP believes the Philippine economy remains strong to weather global uncertainties.

The International Monetary Fund (IMF) stated that the BSP has enough room to further cut interest rates to shield the domestic economy from mostly external risks.

The IMF was generally bullish about faster economic growth of 6.3 percent this year, underpinned by government spending acceleration and the recent monetary policy easing.