Interest rate cuts fail to lift lending

Germany-based Deutsche Bank stated that the Bangko Sentral ng Pilipinas’ (BSP) cumulative 1.25-percent interest rate reductions have been unable to lift lending growth, as lower borrowing costs were not enough to outweigh persistent economic uncertainty.

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This follows BSP Governor Eli M. Remolona Jr.’s earlier statement that although recent developments in inflation and economic growth allow room for further interest rate cuts, these reductions “cannot really compensate entirely for the slowdown in growth.”

“We agree to some extent, as overall credit growth has not gained much momentum despite the BSP’s cumulative 125 bps [basis points] rate cuts so far,” Deutsche Bank Research said in a commentary dated July 4. This figure accounts for all reductions since the BSP began easing in August last year.

Deutsche Bank Research was not primarily pointing toward the lowered key interest rates as the major factor to the sluggish credit activity in the country. The policy rate now stands at 5.25 percent from 6.5 percent before the monetary policy loosening cycle started a year ago.