MANILA - Bangko Sentral ng Pilipinas Gov. Benjamin Diokno said Monday there was "no compelling reason" for a further policy rate cut despite the economy's steep nosedive into recession due to the coronavirus pandemic.
Monetary policy works with a lag and the full effect of the cumulative 175-basis point cut in key interest rates this year is yet to be digested by the markets, Diokno told ANC.
Key interest rate, used by banks to price loans, is at a record low of 2.25 percent.
"There is no compelling reason why the BSP has to move sooner, further policy cut at this time," Diokno said.
"As you know the BSP has been one of the most aggressive central banks in the world in terms of monetary easing…I don’t see any pressure for adjustment," he added.
In fact, there are signs of economic recovery including the pick-up in auto loans by at least P4 billion, he said. Diokno said auto loans reached P568 billion from P564 billion in January.
The rise in demand is due to limited public transport mobility and marketing strategies such as zero downpayment, he said.
"These are indications that the economy is starting to open up and we expect it to pickup much stronger if we fully open up the economy," Diokno said.
The second quarter gross domestic product shrank 16.5 percent, which brought the country into recession. Economic growth contracted by 0.7 percent in the first quarter.
The economy could shrink to as much as 5.5 percent this year, recent government estimates showed, a downward revision from its original forecast of up to -3.4 percent.