Analysts pin rate cut on slump, low inflation

With inflation remaining benign and the economy recently slumping, banks and a think tank have raised expectations that the Bangko Sentral ng Pilipinas (BSP) is likely to reduce its key interest rate by a quarter point on Thursday.

- By DERCO ROSAL

Foreign lenders DBS Bank Ltd and ANZ Bank Ltd. forecast the policy-setting Monetary Board (MB) will deliver a quarter-point reduction, lowering the key policy rate to 4.5 percent from the current 4.75 percent.

If the BSP decides on another easing, this week's cut would bring the total reductions since the easing cycle began last year to two percentage points (ppt). This would also mark the fifth easing move in 2025.

DBS Economic Research economists believe the central bank will remain dovish after this week's expected easing, "given the ongoing slowdown in government spending."

"Within-target inflation will provide the central bank room to shift focus to the weakening growth outlook due to the corruption scandal and resultant depressed sentiment," the Singaporean bank said in a commentary published last Friday, Dec. 5.

Inflation in November was the slowest in four months at 1.5 percent, marking the ninth consecutive month the rate has clocked in below the BSP's two percent to four percent target band, which the government deems manageable and conducive to economic growth.