The Bangko Sentral ng Pilipinas (BSP) said on Thursday that they have resumed their monetary policy easing, citing a manageable inflation environment and the need to cushion the economy from external hardships.
At its first meeting in 2020, the BSP’s Monetary Board cut its benchmark rate by 25 basis points to 3.75%. The central bank described the move as a preemptive action that will hinder economic growth, including the novel coronavirus (2019-nCoV) outbreak.
“The Monetary Board noted that the spread of the 2019 novel coronavirus could have an adverse impact on economic activity and market sentiment in the coming months,” BSP Governor Benjamin Diokno said.
“Given these considerations, the Monetary Board concluded that the manageable inflation environment allowed room for a preemptive reduction in the policy rate to support market confidence,” he added.
The potential influence of the African Swine Fever (ASF) scare and tighter international supply of rice on domestic food prices could put pressure on inflation in the near-term, Diokno said, prompting the BSP to upwardly revise its inflation forecast for 2020 to 3% instead of 2.9%.
On the threats posed by the 2019-nCoV, BSP Deputy Governor Francisco Dakila said the impact of the virus infection on the Philippine economy is likely “short-term” based on previous outbreaks.
BSP director Dennis Lapid said: “The decision on further monetary accommodation will also depend on what we’ll see in terms of the data, particularly on the impact on domestic demand and let’s say tourism receipts and transport activity.”
The spread of the novel coronavirus in China and beyond shows “a new layer of uncertainty” for the European economy, European Central Bank chief Christine Lagarde said on Wednesday. What she said puts the disease on the same level of menace to growth as “global risks” such as trade tensions and geopolitical flashpoints.
Lagarde’s comments follow US Federal Reserve chairman Jerome Powell’s statement last week that the American central bank was “closely monitoring” the virus outbreak, which has killed almost 500 people, infected more than 24,000 in mainland China and has spread to more than 20 countries.
Since becoming central bank governor, Diokno has given the economy a boost with an increasing 75-basis point rate cut in 2019 and a 400-basis point reduction in bank reserves.
With inflation no longer a problem of the BSP, Diokno said that he is looking at a 50-basis point rate cut this year.