UnionBank economist sees more BSP rate cuts

March 22, 2020

An economist of Union Bank of the Philippines forecasts an additional 50 basis points cut in the Bangko Sentral key rates this year after a total of 75 basis points reduction to date.

“I do expect the BSP to continue rate cuts to help calm the domestic markets,” Ruben Carlo Asuncion said.  

The BSP announced a 50-basis-point reduction in key rates after the second-rate setting meet of the policy-making Monetary Board.

The new rate, which took on Friday, is the lowest since the 3.50 percent in July 2014.

The rate reduction was made as the Board continues to see inflation within the government’s two-percent to four-percent target.

The Board even slashed the average inflation forecast for this year to 2.2 percent from 3 percent, and to 2.4 percent from 2.9 percent for next year.

“I do expect 50 bps more, but a May meeting decision may be too far because of the current situation.... It may be an off-cycle one,” he said.

The MB is set to have its third-rate setting meet for the year on May 21.

Asuncion said he expects more rate cuts from the BSP “until probably before Q3 (third quarter) ends, and probably another 50 bps more”.

“We'll see. The situation is very fluid and daily monitoring is crucial and pivotal,” he added.