J.P. Morgan, PNB see BSP cutting rates by 50 bps this year

J.P. Morgan and Philippine National Bank (PNB) now anticipate the Bangko Sentral ng Pilipinas (BSP) will implement an additional 50 basis points (bps) rate cut this year to mitigate the economic impact of the coronavirus (Covid-19) outbreak.

PNB economist Jun Trinidad forecasts a 25-bps reduction in the benchmark reverse repurchase (RRP) rate at the March 19 Monetary Board meeting, followed by another 25-bps cut on May 21.

This revision by PNB adjusts their yearend outlook on the BSP interest policy rate to 3.25 percent from 3.75 percent previously.

The BSP has already cut key interest rates by 25 basis points to 3.75 percent in February.

Trinidad stated that similar to the US Federal Reserve's recent rate cut, the BSP is expected to front-load monetary accommodation in the first half of 2020.

This strategy aims to mitigate COVID-19's downside risks concentrated in the first quarter and take advantage of local inflation's gradual path to normalization.

The BSP has room to cut rates further, as February's inflation rate was 2.6 percent year-on-year, below the consensus forecast of 3 percent.