Bangko Sentral may cut interest rates 2 more times this year: analyst


Posted at Jul 17 2019 04:23 PM | Updated as of Jul 17 2019 04:38 PM

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MANILA - The Bangko Sentral ng Pilipinas could cut interest rates 2 more times this year, enough to bring key borrowing rates to 4 percent, an analyst said Wednesday. 

However, bringing the benchmark rate to 3 percent "is a little too optimistic" since it can narrow the gap between the US Federal Fund rate and BSP interest rate, BPI Securities lead economist Jun Neri told ANC.

The BSP reduced interest rates by 25-basis points in May, bringing the benchmark rate to 4.50 percent.

Philippine shares, which entered the bull market on Monday after a 22-percent gain from its November low, could "pull back" if the benchmark rate is cut to 3 percent, he said. 

"We think they can do 1 or 2 more cuts before the end of the year to bring the policy rates to 4 maybe 4.25, but to bring it to 3 it looks really implausible at this point," Neri said.

“The narrowing of the gap could lead to rapid outflow of foreign funds as they won’t find Philippine assets yielding attractive enough yields,” he added. 

Internal and external factors, such as inflation and the peso to dollar differential, could influence the BSP to hold back in cutting rates, Neri said.