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Chidu Narayanan, economist at Standard Chartered, notes that the Bangko Sentral ng Pilipinas (BSP) cut the policy rate by 25bps to 4.0% on 26 September, in line with expectations.

Key Quotes

“BSP has cut policy rates by 75bps this year, in line with our non-consensus view. In addition, it has delivered 200bps of reserve requirement rate (RRR) cuts this year, announced in May.”

“We now see no further BSP policy rate cuts this year (versus our previous call of one more 25bps cut in November), as BSP was only mildly dovish at the September meeting and expressed concerns about inflation; we believe the RRR is now its preferred monetary policy easing tool. We maintain our expectation of another 100bps of RRR cuts, likely announced in the next few weeks.”

“We lower our 2019 growth forecast to 5.8% from 6.1%, to reflect soft H1 growth of 5.5% and likely subdued private-sector growth in H2.”

“We also lower our 2020 growth forecast to 6.3% from 6.5%, as we expect the same factors to weigh on growth next year.”

“Inflation is likely to decline further to 1% y/y in September and October; we expect it to rise thereafter as the high base effect from 2018 fades. We lower our 2019 and 2020 average inflation forecasts to 2.5% (from 2.7%) and 3.4% (from 4.2%), respectively, to reflect slower private-sector investment on tight monetary conditions.”