MANILA — The central bank looks certain to leave its policy rate unchanged on Thursday, after stronger-than-expected economic growth in the third quarter and with inflation likely to remain tame in the coming months, a Reuters poll showed.
Ten economists forecast the Bangko Sentral ng Pilipinas (BSP) will pause its easing cycle to assess the effects of three cuts to the benchmark interest rate this year. It last cut the rate to 4.0% at its September review.
BSP Governor Benjamin Diokno said the central bank’s policy stance remained appropriate following data last week that showed the economy grew 6.2% in the third quarter, beating forecasts and stronger than the previous three month’s 5.5%.
Even before the GDP data, Diokno said there would be no more policy rate and reserve requirement ratio (RRR) cuts this year, and that policymakers would assess macroeconomic conditions next year.
The country remains one of the fastest-growing economies in Asia, but authorities have said uncertainties spawned by the ongoing U.S.-Sino trade tensions were major risks to the country’s growth outlook.
Nine of the 10 economists polled said policy rates would be kept steady for the rest of the year, and the majority of them expect the central bank to resume cutting rates as early as the first quarter of next year.
“We expect the BSP to continue its easing cycle in Q120 on the basis of normalizing interest rates. The real policy rate in the Philippines is one of the highest in Asia, which could impinge on growth in the coming quarters,” HSBC said in a note.
At least one economist is not ruling out a fourth rate cut at the central bank’s last policy meeting this year on Dec. 12.
Authorities have said the bottom end of this year’s 6%-7% growth target would likely be met on slowing inflation and as the government catches up on its spending, which was slowed by the delay in the approval of this year’s budget.
Cooling inflation has allowed the central bank to cut interest rates by a total of 75 basis points this year, reversing some of last year’s tightening, which should bode well for domestic consumption, a major driver of economic growth.
The central bank also reduced the amount of cash that banks must hold as reserves by 300 basis points, with another cut of 100 bps to take effect in December, bringing the ratio to 14%.
— Reporting by Karen Lema; Editing by Jacqueline Wong
