​Surprise rate cut

PHILIPPINES - In Brief 25 Jun 2020 by Romeo Bernardo
The Monetary Board (MB) unexpectedly cut policy rates by 50bp today, bringing the key overnight borrowing rate to 2.25%. It is evident from its statement that the MB is worried about economic growth. Banks are not lending as hoped, with monies parked in the BSP’s deposit facilities rising from a little over P800 billion in end-April to over P1.2 trillion in the first week of June. Notwithstanding multilateral agencies’ updated GDP forecasts this month that are only slightly below government’s low-end -3.4% target, we think our more pessimistic -7% growth forecast remains appropriate especially given the difficulties we’ve observed of restarting the economy under distancing protocols. We will have more to say about this in the next brief.

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