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Financial News: Philippine Central Bank Cuts Rate, Sees Impact From

Philippine Central Bank Cuts Rate, Sees Impact From Coronavirus Outbreak

02/06/2020 - 04:55:00 (RTTNews)

(RTTNews) - The Philippines' central bank slashed its key interest rate on Thursday, citing a manageable inflation environment, and said that the novel coronavirus outbreak that started in China is set to have an adverse impact on the economy.

The Monetary Board of the Bangko Sentral ng Pilippinas, or BSP, decided to cut the overnight reverse repurchase facility rate by 25 basis points to 3.75 percent.

The decision was in line with economists' expectations. The bank had left the rate unchanged in the previous two policy sessions.

"While recent demand indicators still point to a firm outlook for the domestic economy, the Monetary Board believes that a policy rate cut would provide additional policy support to ward off the potential spillovers associated with increased external headwinds," the bank said.

The overnight lending rate and the deposit facility rate were reduced to 4.25 percent and 3.25 percent, respectively.

The risks to the inflation outlook continue to tilt slightly toward the upside in 2020 and toward the downside in 2021, the bank said.

Like other central banks, especially Asian ones, the BSP also expressed concern regarding the novel coronavirus outbreak that started in the Chinese city of Wuhan.

"The Monetary Board noted that the spread of the 2019 novel coronavirus could have an adverse impact on economic activity and market sentiment in the coming months," the central bank said. ING economist Nicholas Mapa said the latest reduction in the policy rate was a "pre-emptive" move to insulate growth in the backdrop of the adverse impact from the coronavirus. The economist expects the BSP to cut the interest rates again, as early as the May policy session, but delay any reduction to the reserve requirement ratios to the second half of the year.

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