Remolona rejects off-cycle rate cut

Even as the local economy is expected to fare worse than the four-percent expansion in the third quarter, the Bangko Sentral ng Pilipinas (BSP) said that slashing the freshly lowered key interest rate by 50 basis points (bps) could signal desperation on the part of monetary authorities, which could further erode confidence.

- BY DERCO ROSAL

Speaking to reporters on the sidelines of the 4th Digital Financial Inclusion Awards, BSP Governor Eli M. Remolona Jr. said the Monetary Board (MB) will not move aggressively on easing after the BSP’s highest policy-setting body decided to trim the key interest rate to 4.5 percent for the fifth time this year.

Remolona explained that the latest reduction was mainly due to the weakness of gross domestic product (GDP) growth, singling out private consumption as the area the central bank was able to anchor.

He said the BSP’s emerging GDP forecast points to 3.8-percent growth in the fourth quarter, slower than the 4.5-percent expansion in the previous quarter.

Excluding the pandemic, this lackluster growth would be the slowest since the third quarter of 2011, at three percent. This would be a déjà vu of the era when former President Benigno Simeon Aquino III also launched an anti-corruption campaign that tightened government spending.