Philippines cuts rate 5th time in 2020 amid stable CPI

     The central bank of the Philippines cut its key interest rate for the fifth time this year, saying "there remains enough policy space for a rate cut "to uplift market sentiment and nurture the country's economic recovery amid increased downside risks to growth."

     Bangko Sentral Ng Pilipinas (BSP) cut the rate on its overnight reverse repurchase facility by another 25 basis points to 2.0 percent and has now cut it 200 points this year following earlier cuts in February, March, April and June. 

     As many other emerging market central banks, BSP began easing its monetary policy stance last year in response to slowing global growth and since it began cutting rates in May 2019, the rate has been cut 8 times and by a total of 275 points.

     In addition to the overnight repo rate, BSP also cut the rate on its overnight deposit and lending facilities by 25 basis points to 1.5 percent and 2.5 percent, respectively.

     Inflation in the Philippines has remained stable in recent months around 2.5 percent and BSP said it expects the benign inflation environment to continue, with inflation expectations anchored within its target range of 2.0 to 4.0 percent.

     This year and up to 2022, BSP expects inflation to settle within the lower half of its range, reflecting slower domestic economic activity, lower global crude oil prices and the recent rise in the peso.

     It added the balance of risks to the outlook for inflation remain tilted to the downside due to "potential disruption to domestic and global economic activity amid the ongoing pandemic."

     Although domestic output contracted slower than expected in the third quarter, BSP said global economic prospects have moderated in recent weeks amid a resurgence of COVID-19 cases and recent natural calamities could pose strong headwinds to the economic recovery in coming months.

     "Given these considerations, the Monetary Board assessed that there remains a critical need for continuing policy support measures to bolster economic activity and boost market confidence," the central bank said.

      The Philippine economy expanded by 8 percent in the third quarter from the second quarter.

Philippines cuts rate 4th time in 2020 on benign inflation

     The Philippine central bank cut its key interest rate for the fourth time this year and for the seventh time in just over a year, saying "a further reduction in the policy rate amidst a benign inflation environment would help mitigate the downside risks to growth and boost market confidence."
     Bangko Sentral Ng Pilipinas (BSP) cut the rate on its overnight reverse repurchase facility (RRP) by a further 50 basis points to 2.25 percent and has now cut it 175 points this year following cuts in February, March and April.
     BSP has been lowering its interest rates since May 2019 and has now cut them by 250 basis points since then.
     The Philippine peso has been on a rising trend since October 2018, with the seven rate cuts only slowing the general upward trend slightly.
    Today the peso was trading at 50.0 to the U.S. dollar, up 1.5 percent since the start of this year and 8.6 percent higher than a low of 54.3 in early October 2018.

     In addition to the cut in RRP, the bank's monetary board cut the rate on the overnight deposit facility to 1.75 percent and the rate on the overnight lending facility to 2.75 percent.

     Inflation in the Philippines fell to 2.1 percent in May, the fourth consecutive month of deceleration, and BSP said the latests forecast show inflation could settle near the low end of its inflation target of 3.0 percent, plus/minus 1 percentage point in 2020 and up to 2022.

     The decline in inflation had fueled expectation by some analysts that BSP would cut its rate today.

     Although economies around the world are beginning to reopen from measures to prevent the spread of Covid-19 and the functioning of financial markets has improved, BSP said the global recovery is likely to be "protected and uneven" and domestic economic activity has slowed.

     "Hence, there remains a critical need for continuing measures to bolster economic activity and support financial conditions," BSP said, pointing to measures to protect human health, boost agricultural productive and build infrastructure.
      BSP said it remains committed to "deploying its full range of monetary instruments and regulatory relief measures as needed" to meet its mandate of promoting non-inflationary and sustainable economic growth.

Philippines cuts rate 50 bps in unscheduled move

     The Philippine central bank cut its policy rate by a further 50 basis points to 2.75 percent in an unscheduled policy decision, with its governor saying the move is "to strongly encourage lending to various sectors, especially to the most vulnerable, amid the COVID-19 pandemic."
      News of the rate cut by Bangko Sentral Ng Pilipinas (BSP) monetary board was announced by Governor Benjamin Diokno on social media and by text messages to reporters.
      BSP has been steadily cutting its policy rate since May 2019 and has now cut it six times since then by a total of 200 basis points. It is BSP's third rate cut this year following cuts in February and March, with this year's cuts totaling 125 basis points.
      The rate cut comes on the same day Philippine stocks tumbled 7.1 percent.
      BSP is the 62nd central bank to cut its rates at an emergency decision since the U.S. Federal Reserve cut its rate in a surprise move on March 3.
     Although BSP's rate cut was unscheduled and comes more than a month before the board's next scheduled meeting on May 21, it did not come as a surprise as it follows Diokno's statement on April 11 that BSP is ready to lower its rate to below a previous record low of 3 percent to support an economy reeling from a once in a lifetime crises.
     On April 5 Diokno was also reported to have said BSP has a lot of room to cut its interest rates as it is faced to a real risk of recession due to the coronavirus pandemic.
      Diokno, who has a history of foreshadowing policy decisions before they are taken by the bank's board, was also reported to have said on April 11 that another 2 percentage point cut in the bank's reserve requirement ratio was forthcoming.
      BSP already cut its reserve requirement by 200 basis points to 12.0 percent in a special meeting by its monetary board on March 24. The board also authorized cuts of up to 400 basis points this year, giving Diokno the authority to determine the timing and extent of the cuts to address any strains in financial markets.
     In 2019 BSP cut its reserve requirements by 500 basis points and Diokno has said he is aiming to lower the ratio to a single digit by 2023.
     In addition to cuts to its interest rates and reserve requirements, BSP' last month launched a 300 billion peso government bond buying program, with funds used to support the government's efforts to counter the impact of the virus.
     Under the agreement, the Philippine treasury will repay the funds in less than 6 months.
 
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Philippines cuts banks' reserve requirement 200 bps

     The Central Bank of the Philippines, which has cut its key interest rate twice this year, lowered its reserve requirement ratios on universal and commercial banks by 200 basis points to 12.0 percent, saying this is to "ensure sufficient domestic liquidity in support of economic activity amidst the global pandemic due to the Coronavirus Disease (COVID-19.)
     In a statement, Bangko Sentral ng Pilipinas (BSP) said a special meeting of its monetary board had authorized Governor Benjamin Diokno to lower the reserve requirements by up to a maximum 400 basis points in 2020.
     The board authorized Diokno to to determine the timing and extent of the reserve requirement reductions by taking into account the impact of the virus on liquidity in domestic markets, giving him flexibility to promptly address any strains in the market.
     Following this decision, Diokno announced the 200 basis point cut as of March 30 to "calm markets and to encourage banks to continue lending to both retail and corporate sectors."
     Potential cuts to reserve requirements for other institutions will be explored, the statement added.
     Last year BSP lowered its reserve requirements 500 basis points to 14 percent, most recently in October, and Diokno has said he aims to lower the rate to a single digit by 2023.
     BSP has been easing its monetary policy stance since May 2019 and has lowered its overnight reverse repurchase (RRP) rate rate 5 times since then by a total of 150 basis points to 3.25 percent.
     The most recent cut took place on March 19 when BSP also temporarily relaxed its regulations for compliance reporting by banks, the calculation of penalties on required reserves and single borrower limits to mitigate the risk of financial sector volatility and ensure adequate liquidity and credit.
     On March 19 BSP lowered its forecast for inflation in 2020 to 2.2 percent from February's 3.0 percent and the 2021 forecast to to 2.4 percent from 2.9 percent, due to the fall in oil prices, lower inflation in recent months and the adverse effects of the virus on global and domestic economic activity.
      It also said the balance of risks to the inflation outlook now leans to the downside and uncertainty over the "potentially protracted pandemic poses significant downside risks to aggregate demand."
      On March 23 Diokno was quoted as telling reporters that BSP will buy 300 billion pesos of debt from the Treasury under a 3-month repurchase agreement, renewable for another 3 months, with the government using the funds to contain the impact of the virus.

Philippines cuts rate 25 bps to ward off headwinds

     The Philippine central bank cut its benchmark overnight reverse repurchase rate by 25 bps to 3.75 percent, saying "the manageable inflation environment allowed room for a preemptive reduction in the policy rate to support market confidence" and ward off "the potential spillovers associated with increased external headwinds."
     The rate cut by Bangko Sentral Ng Pilipinas (BSP), its fourth since May 2019, was widely expected as Governor Benjamin Diokno on Feb. 5 said it would be better to cut interest rates sooner than later, adding the central bank is still looking to unwind the 2018 rate hikes and expects to cut rates by 50 basis points this year.
     The outbreak of the coronavirus, which poses a new and unexpected risks to economic growth across Asia, boosted rate cut expectations further.
     BSP raised its rate by 175 basis points in 2018 to curb inflationary pressures from a fall in the peso and then unwound 75 points of this in 2019, leaving 100 basis points to be reversed.
     In today's statement, BSP's monetary board said inflationary expectations remain anchored within the target range of 3.0 percent, plus/minus 1 percentage point, and inflation is seen broadly steady in 2020 and 2021, with average inflation in the target range.
      Upside risks to prices from the outbreak of the African Swine Fever, tight supply of rice, and the ongoing Taal volcano eruption and aftermath of typhoon Tisoy are mitigated by uncertainty over trade and economic policies that weigh on global demand while the prospects for global economic growth have weakened amid geopolitical tensions.
     "At the same time, 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," BSP said.
      Inflation in the Philippines rose to 2.9 percent in January from 2.5 percent in December while the economy expanded by an annual 6.4 percent in the fourth quarter of 2019 for full-year growth of 5.9 percent, down from 6.2 percent in 2018 amid delays in the budget approval.
      The government targets 2020 economic growth of 6.5 to 7.5 percent but industrial output is still contracting, with output in December down 9.5 percent year-on-year, the 13th consecutive month of a decline and the steepest fall since August 2019.
     After falling steadily from March 2013 to September 2018, the Philippine peso has been rising in the last 16 months but was steady in the wake of the rate cut, trading at 50.7 to the U.S. dollar from 50.8 at the start of the year.

UPDATE-2020 Global Central Bank Monetary Policy Calendar

     Herewith a third draft of the 2020 calendar for meetings by central bank committees that decide monetary policy, which adds the central banks of Colombia, Taiwan, Indonesia, Mexico and the Philippines.
     The following table includes the date for scheduled monetary policy meetings for more than 45 of the world's central banks. In the event policy meetings take place over several days, the date listed below is for the final day of the meetings when decisions are normally announced.
     Central Bank News will update this calendar in coming weeks as more central banks release their meeting schedule for 2020.
     During the year the calendar is regularly updated as some monetary policy committees only announce the date for the upcoming meeting a few weeks in advance.
     Readers are therefore encouraged to check the latest version of the calendar here.
     You may replicate the calendar in part of full only if you link to Central Bank News.

DATE	FX CODE	COUNTRY	CENTRAL BANK
JANUARY
8-Jan	RON	Romania	National Bank of Romania
8-Jan	PLN	Poland	National Bank of Poland
9-Jan	ILS	Israel	Bank of Israel
9-Jan	RSD	Serbia	National Bank of Serbia
9-Jan	PEN	Peru	Central Reserve Bank of Peru
16-Jan	TRY	Turkey	Central Bank of Republic of Turkey
16-Jan	ZAR	South Africa	South African Reserve Bank
16-Jan	EGP	Egypt	Central Bank of Egypt
17-Jan	KRW	South Korea	Bank of Korea
17-Jan	ZWD	Zimbabwe	Reserve Bank of Zimbabwe
21-Jan	JPY	Japan	Bank of Japan
22-Jan	CAD	Canada	Bank of Canada
22-Jan	MYR	Malaysia	Central Bank of Malaysia
23-Jan	NOK	Norway	Norges Bank
23-Jan	IDR	Indonesia	Bank Indonesia
23-Jan	EUR	Euro area	European Central Bank
27-Jan	AMD	Armenia	Central Bank of the Republic of Armenia
27-Jan	KGS	Kyrgyzstan	National Bank of the Kyrgyz Republic
28-Jan	HUF	Hungary	Central Bank of Hungary
29-Jan	GEL	Georgia	National Bank of Georgia
29-Jan	MDL	Moldova	National Bank of Moldova
29-Jan	USD	United States	Federal Reserve
29-Jan	CLP	Chile	Central Bank of Chile
30-Jan	LKR	Sri Lanka	Central Bank of Sri Lanka
30-Jan	UAH	Ukraine	National Bank of Ukraine
31-Jan	AZN	Azerbaijan	Central Bank of Azerbaijan Republic
31-Jan	BGN	Bulgaria	Bulgarian National Bank
31-Jan	COP	Colombia	Central Bank of Colombia

Philippines takes 'prudent pause' to let cuts take effect

     Bangko Sentral Ng Pilipinas (BSP), the central bank of the Philippines, left its benchmark overnight reverse repurchase (RRP) facility rate steady at 4.0 percent and said it would take "a prudent pause" in further changes to monetary policy to allow this year's easing take effect.
     BSP, which has cut its rate three times this year and lowered the reserve requirement for banks, added this decision was supported by a benign outlook for inflation due to the prospects for weak global growth and a firm outlook for the domestic economy.
     "Given these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate," the central bank said.
     The decision was widely anticipated by investors following last Sunday's statement by Governor Benjamin Diokno that the central bank had done "more than enough" for the year, referring to a total cut in the key rate of 75 basis points in May, August and September, along with a 100 point cut in the reserve requirement, effective this month.
    "A prudent pause in monetary adjustments will enable the cumulative 75-basis-point reduction in policy rates as well as the cut in reserve requirement ratios to continued working their way through the economy," BSP said today.
     Looking ahead, BSP said it would continue to monitor inflation and economic output to ensure its policy stance remains consistent with stable prices while supporting economic growth.
     Inflation in the Philippines has trended down in the last 12 months but BSP said the latest forecasts continue to indicate inflation is likely to settle within the lower half of its target range of 3.0 percent, plus/minus 1 percentage point for this year and up to 2021, with the balance of risks on the upside for 2020 and to the downside for 2021.
     In October inflation in the Philippines fell to 0.8 percent from 0.9 percent in September, down from a 10-year high of 6.7 percent in October 2018, and in September BSP cut its inflation forecast for this year to an average 2.5 percent from a previous forecast of 2.6 percent.
     The potential outbreak of African Swine Fever and potential volatility in oil prices present the main upside risks to inflation while uncertainty over trade policies continue to weigh on global economic activity and demand, dampening the upside risks.
     Firm domestic spending and sustained progress in policy reforms should help serve as "a buffer" against external headwinds for the Philippines, BSP said, adding it trusts the fiscal 2020 budget would be passed this year.
     The Philippine economy grew 6.2 percent year-on-year in the third quarter, up from 5.5 percent in the second quarter and 5.6 percent in the first quarter.
     The Philippine peso has strengthened in the last 12 months and 50.8 to the U.S. dollar today, up 3.5 percent this year.

Philippines cuts reserve requirement another 100 bps

     The Philippine central bank lowered its reserve requirement for banks by another 100 basis points to boost liquidity in domestic markets and credit activity, the day after cutting its benchmark interest rate for the third time this year.
     In a statement from Sept. 27, Bangko Sentral Ng Pilipinas (BSP) said the new reserve requirement for universal and commercial banks would be lowered to 15 percent as of the first week of November.
     Between May and July this year BSP also lowered its reserve requirement in three stages by 200 basis points and the bank's governor, Benjamin Diokno, has said he aims to lower the rate to a single digit by 2023.
     For thrift banks the reserve requirement will be lowered to 5.0 percent from 6.0 percent and for rural banks to 3.0 percent from 4.0 percent.
     In addition to boosting liquidity in the domestic markets, BSP said the cut in the reserve requirement was in line with its agenda to reform the financial sector and make it more efficient by lowering the costs of financial intermediation.
     On Sept. 26 BSP cut its policy rates, including the overnight reserve repurchase rate (RRP) by 25 basis points to 4.0 percent, to reinforce market confidence amid a benign outlook for inflation.
     BSP also lowered its forecast for inflation to average 2.5 percent this year, down from the August forecast of 2.6 percent, in the lower end of the bank's inflation target range of 3.0 percent, plus/minus 1 percentage point.
     Inflation in the Philippines has been trending downward since hitting a 10-year high of 6.7 percent in September and October last year in response to new taxes and higher food prices, and fell to 1.7 percent in August from 2.4 percent in July.
     The economy of the Philippines slowed to an annual rate of 5.5 percent in the second quarter from 5.6 percent in the first quarter, partly due to a delay in passing a 2019 national budget that includes funds for President Rodrigo Duterte's ambitious "Build, Build, Build" infrastructure program.

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Philippines cuts rate 3rd time to boost growth,confidence

     The central bank of the Philippines lowered its benchmark interest rate for the third time as "the benign inflation outlook provides room for a further reduction in the policy rate to support economic growth and reinforce market confidence."
     Bangko Sentral Ng Pilipinas (BSP) cut its overnight reverse repurchase rate (RRP) by another 25 basis points to 4.0 percent and has now cut it by 75 points this year following cuts in May and August as it continues to unwind last year's rate hikes of 175 points.
     In addition to the rate cuts, BSP has also lowered the reserve requirement for banks by 2 percentage points in three stages to ease any tightness in liquidity.
     "The Monetary Board's decision is based on its assessment that price pressures have eased further since the previous meeting," BSP said, adding the latest forecasts indicate inflation is likely to settle within the lower half of the bank's target range of 3.0 percent, plus/minus 1 percentage point for 2019 up to 2021 and inflation expectations still remain well-anchored within the target range.
     This outlook for inflation is slightly down from BSP's view in August when it expected inflation to settle within the target range.
     The central bank added prospects for global economic growth were likely to remain weak due to uncertainty over trade policies while firm domestic spending and progress on policy reforms will serve as a buffer against the global headwinds.
      Inflation in the Philippines has been trending downward since hitting a 10-year high of 6.7 percent in September and October last year, with prices boosted by new taxes and food supply bottlenecks, and and fell to 1.7 percent in August from 2.4 percent in July.
      The balance of risks to the outlook have shifted toward the upside for 2020, BSP said, adding they were now tilted to the downside for 2021.
     Among the upside risks to inflation are volatile oil prices from geopolitical tensions in the Middle East and the potential impact of the African Swine Fever on food prices. On the other hand, subdued global economic activity is tempering inflation.
     In addition to lowering its RRP rate, BSP also cut the rate on its overnight deposit and lending facilities to 3.5 percent and 4.5 percent, respectively.
      Economic growth in the Philippines slowed to an annual rate of 5.5 percent in the second quarter of this year from 5.6 percent in the first quarter while the peso has remained relatively stable and was trading at 52.13 to the U.S. dollar today, up 0.8 percent this year.

Philippines cuts rate 2nd time as price pressures ease

     The central bank of the Philippines lowered the rate on its benchmark overnight reverse repurchase (RRP) facility by 25 basis points to 4.25 percent as it returned to the path of easing after pausing in June as "weaker global economic prospects continue to temper the inflation outlook."
     In May Bangko Sentral Ng Pilipinas (BSP) began to unwind last year's rate hikes that totaled 175 basis points by cutting the rate by 25 points. But the central bank then took what it described as a "prudent pause" in June to asses the impact of the rate cut and its phased 2 percentage point reduction in reserve requirements that was completed in late July.
     But data for the second quarter of this year showed a continued deceleration in economic growth to the slowest pace since the first quarter of 2015 while inflation for July slowed further to 2.4 percent from 2.7 percent in June.
     "The Monetary Board's decision is based on its assessment that price pressures have continued to ease since the previous meeting," BSP said, adding the benign outlook for inflation provided room for a further cut to the rate "as a pre-emptive move against the risks associated with weakening global growth."
    BSP still expects inflation to settle within its target range of 3.0 percent, plus/minus 1 percentage point for 2019 to 2021 but said inflation expectations had moderated further and while the risks to its inflation outlook are broadly balanced for 2019 and 2020, they tilt to the downside for 2021.
    In addition to lowering its benchmark rate, BSP also cut the rate on its overnight deposit and lending facilities to 3.75 percent and 4.75 percent, respectively.
    The rate cut was widely expected after data earlier today showed the Philippines' gross domestic product decelerated to a lower-than-expected 5.5 percent annual rate in the second quarter from 5.6 percent in the first quarter and 6.3 percent in the fourth quarter of last year.
     In addition, the central bank's governor, Benjamin Diokno, earlier this week told Bloomberg that he expects to cut the rate by another 50 basis points this year, with the timing of the cuts dependent on economic data.
     Diokno also said he expects inflation to average 2.6 percent this year, down from an earlier forecast of 2.7 percent, and 2.9 percent in 2020, down from 3.0 percent previously expected.
     In today's statement, BSP said the prospects for global economic activity were likely to remain weak amid sustained trade tensions and going forward it would continue to monitor price and output to ensure its policy stance is "appropriately supporting of sustained non-inflationary economic growth over the medium term."

Philippines cuts rate 25 bps on balanced inflation risks

     The Philippine central bank lowered its rate on the benchmark overnight reverse repurchase (RRP) facility by 25 basis points to 4.50 percent, saying this decision "is based on its assessment that the inflation outlook continues to be manageable, with easing price pressures owing to the decline in food prices amid improved supply conditions."
     The rate cut by Bangko Sentral Ng Pilipinas (BSP) was widely expected by investors following recent statements by its governor, the steady decline of inflation to within BSP's target range and the slowest economic growth in four years.
     The cut begins to reverse last year's 175 point rate increase between May and November after the peso weakened to record lows in response to U.S. policy tightening, helping push up inflation to a 10-year high, with prices boosted further by new taxes and food supply bottlenecks.
     But inflation has now decelerated six months in a row to 3.0 percent in April from 6.7 percent in October and BSP confirmed it expects inflation to settle within its target range of 3.0 percent, plus/minus 1 percentage point, in both 2019 and 2020 and inflation expectations had eased further.
     BSP said the risks to its inflation outlook in 2019 remained broadly balanced between a prolonged El Nino episode and higher-than-expected oil prices.
     For 2020, the risks continued to lead to the downside as weaker global growth could temper a rise in commodity pries. 
     The Philippine economy slowed gradually during 2018 and continued to decelerate in the first quarter of this year.
      The Philippine gross domestic product grew an annual 5.6 percent in the first quarter of 2019, down from 6.3 percent in the previous quarter and the weakest since first quarter 2015, hit by lower exports and parliament's delay in passing the government's 2019 budget until April.
     The monetary board "noted" the impact of the budget delays on economic activity, but was of the view that domestic demand remains firm and will be supported by a recovery in spending and the continued implementation of the government's infrastructure program amid slower global growth.
     Today's statement by BSP's monetary board does not mention any decision about the bank's reserve requirement but local press reports Governor Benjamin Diokno told reporters after the policy decision a proposal to lower the reserve ratio will be discussed next week.
      Prior to raising its rates last year, BSP had lowered the reserve ratio to the current 18.0 percent and since taking over in March Diokno has said he would like to cut it again as it remains the highest in Asia.
     After falling from January through September last year, the Philippine peso has firmed slightly this year and was trading at 52.3 to the U.S. dollar after the rate cut, up 0.6 percent this year.

Philippines raises rate 50 bps as inflation accelerates

      The Philippine central bank raised its benchmark overnight reverse repurchase rate (RRP) by another 50 basis points to 4.50 percent, its fourth hike since May, recognizing that  "further tightening was warranted by persistent signs of sustained and broadening price pressures."
       Bangko Sentral Ng Pilipinas (BSP), which has now raised its policy rate by a total of 150 basis points this year, said the outlook for inflation for 2018 and 2019 had shifted upwards and the risks were still toward the upside while domestic demand has generally remained firm even as  the monetary tightening works its way through the economy.
       With supply forces expected to drive up inflation in coming months, inflation expectations remain elevated amid signs of second-round effects, the central bank said, adding:
      "The Monetary Board, therefore, decided to raise the BSP policy interest rate anew to further anchor inflation expectations and to safeguard the inflation target over the policy horizon."
       The rate hike was widely expected following the continued acceleration of inflation, a peso exchange rate that has hit record lows, and statements by the BSP's deputy governor, Diwa Guinigundo, earlier this week that the central bank would take "very strong" action today.
        BSP said tighter monetary policy should help steer inflation toward its target by "reducing further risks to the inflation outlook, including those emanating from exchange rate volatility given the continued uncertainty in the external environment amid geopolitical tensions and the normalization of monetary policy in advanced economies."
       Headline inflation in the Philippines rose for the 8th month in a row to 6.4 percent in August from 5.7 percent in July, well above its target range of 2.0 - 4.0 percent, around a 3.0 percent midpoint.
      The peso rose slightly in response to BSP's rate hike to 54.19 per U.S. dollar but has fallen 7.7 percent since the start of the year.

Philippines raises rate 50 bps, signals in may now pause

       The central bank of the Philippines raised its monetary policy rate for the third month in a row to "rein in inflation expectations and prevent sustained supply-side price pressures from driving further second-round effects," but signaled that it may now pause in its tightening campaign.
      Bangko Sentral Ng Pilipinas (BSP) raised its benchmark overnight reverse repurchase facility (RRP) rate by a sharp 50 basis points to 4.0 percent and has now raised it by a total of 100 points this year following increases in May and June as inflation continues to accelerate.
      The rate hike was expected and follows the BSP's warning in its June policy statement that it was prepared to take further action and statements last month by its governor, Nestor Espenilla, that the central bank is considering strong action to curb inflation, which he said may first peak in the third quarter, and dampen volatility in the foreign exchange market.
      BSP said the latest forecasts have shifted upward and show that inflation may also exceed the central bank's target in 2019. Up to now, BSP was confident that inflation would return to its target of 2 - 4 percent, around a 3.0 percent midpoint, next year.
       "Upside risks also continue to dominate the inflation outlook, as the sustained increase in core inflation suggests broadening price pressures amid resilient aggregate demand conditions," BSP said, adding that inflation expectations remain elevated though still within the target for 2019.
      Inflation in the Philippines rose for the seventh month in a row to 5.7 percent in June, the highest reading since March 2009, and the fifth month it has topped the BSP's upper inflation limit.
       BSP has previously forecast that inflation would average 4.5 percent this year and then 3.3 percent in 2019.
       But the central bank's monetary board also signaled that it may now pause in further rate hikes, saying its actions so far this year "will help reduce further risks to inflation," including those emanating from the normalization of monetary policy in advanced economies and its impact on currency markets and help bring inflation toward its target.
       Although the Philippine economy slowed in the second quarter, BSP seemed confident that its tighter policy would not result in a economic slump.
       "Favorable conditions arising from sustained domestic growth also suggests that the economy can accommodate a further tightening of monetary policy settings," BSP said.
        The Gross Domestic Product of the Philippines slowed to quarterly growth of 1.3 percent in the second quarter of this year for annual growth of 6.0 percent, down from 6.6 percent in the first quarter.
        After falling sharply between January and mid-July on broad-based U.S. dollar strength, the Philippine peso has staged a comeback in recent weeks and was trading around 53.0 to the dollar today, up from lows around 53.6 on July 19 but still down 5.7 percent since the start of this year.
        Last month the International Monetary Fund raised its 2018 inflation forecast for the Philippines to 4.7 percent from an earlier 4.2 percent and said the BSP would have to consider further monetary tightening to douse inflation expectations.
        The IMF also lowered its 2018 growth forecast to 6.7 percent from 6.8 percent.

Philippines raises rate for 2nd month, stresses vigilance

      The Philippine central bank raised its monetary policy rates for the second month in a row, saying it is ready to take further action if needed and emphasized its "continued vigilance against developments, including excessive peso volatility, that could affect the outlook for inflation."
      Bangko Sentral ng Pilipinas (BSP) said it "is prepared to take further policy action as needed to achieve its price and financial stability objectives."
      BSP raised its benchmark overnight reverse repurchase (RRP) by another 25 basis points to 3.50 percent, along with its overnight lending and deposit rates, a move that was expected by most analysts.
      The benchmark rate has now been raised 50 basis points following the hike in May, which was the first rate hike by BSP since September 2014.
      Today's rate hike follows a rise in inflation in May to 4.6 percent, the fifth month of accelerating inflation and the third month inflation has been over the central bank's target range of 2 -4 percent around a 3.0 percent midpoint.
      Explaining the reason for its second consecutive rate increase, BSP said inflation expectations for this year remained elevated and this posed a risk of further prices increases.
      And while 2019 inflation expectations remain within the target range, BSP said elevated expectations for this year posed a risk of sustained price pressure from future wage and prices.
      Rising oil and commodity prices is also expected to have a stronger effect on inflation given robust demand in the Philippines, underlying that upside risks dominate the inflation outlook.
      Last week's hawkish stance by the U.S. Federal Reserve has also put further pressure on the exchange rate of the peso, which the raises import prices and adds to inflationary pressure.
      The peso has been weakening all year and was trading at 53.46 to the U.S. dollar today, down 6.5 percent since the start of this year.

Philippines hikes rate 25 bps to curb inflation expectation

       The Philippine central bank raised its benchmark overnight reverse repurchase (RRP) rate by 25 basis points to 3.25 percent, as widely expected, saying it believes "a timely increase in the BSP's policy interest rate will help arrest potential second-round effects by tempering the buildup in inflation expectations."
       It is the first rate hike by Bangko Sentral ng Pilipinas (BSP) since September 2014 and the first change in rates since June 2016 when the central bank adopted an interest corridor system that shifted the policy rate to 3.0 percent from 4.0 percent.
       The rate hike confirms the gradual tightening of monetary policy worldwide in response to rising inflation from higher oil prices and solid economic growth. The Philippines is the fourth Asian country to tighten policy following South Korea last year, and Malaysia and Singapore this year.
       The rate hike was well-telegraphed by BSP officials and follows accelerating inflation in the last four months and data today that showed annual economic growth of 6.8 percent in the first quarter of this year, up from 6.5 percent in the fourth quarter last year.
       "The Monetary Board observed that strong domestic demand allows some scope for a measured adjustment in the policy rate without adversely affecting the country's economic growth momentum," BSP said.
        In April headline inflation in the Philippines rose to 4.5 percent from 4.3 percent in March under the new base year of 2012, and above the BSP's target of 3.0 percent, plus/minus 1 percentage point. Under the previous 2006 CPI basket, inflation in April was 5.1 percent, up from 4.8 percent.
        In March the central bank forecast inflation under the new base year would average 3.9 percent in 2018 and then ease to 3.0 percent in 2019.

       "In deciding to raise the policy interest rate, the Monetary Board noted that latest forecasts have further shifted higher, indicating that inflation pressures could become more broad-based over the policy horizon," BSP said.
      BSP said inflation momentum had started to slow but inflation is still expected to breach its 2018 target range due to temporary supply-side factors and then return to its target in 2019.
      However, BSP said the balance of risks continue to lean to the upside, with price pressures from possible changes to transport fares, utility rates and wages.
      The Philippine peso fell slightly in response to the rate hike and was trading at 52.0 to the U.S. dollar, down 3.8 percent this year.

Philippines maintains rate but 'watchful' over inflation

     The central bank of the Philippines kept its key policy rate steady at 3.0 percent but said the risks to the inflation outlook remain weighted toward the upside due to possible further rises in oil prices and it was "watchful against any signs of second-round effects and inflation becoming broader based."
      Bangko Sentral ng Pilipinas (BSP), which has maintained its monetary policy stance since September 2014, said it latest forecast shows higher inflation this year but it is still expected to moderate and then settle within the target range of 3.0 percent, plus/minus 1 percentage point.
      But BSP raised its 2018 inflation forecast to 4.3 percent - above its target range - from an earlier 3.4 percent due to higher global oil prices, higher taxes and food prices.
      For 2019 BSP forecasts 3.5 percent inflation, up from 3.2 percent previously forecast.
      Inflation in the Philippines accelerated to a higher-than-expected 4.0 percent in January from 3.3 percent in December, for the highest rate since October 2014, as the cost of food, transport and housing rose.
      Although the BSP has said the rise in inflation is temporary and partly reflects last month's tax increases, economists expect the central bank to raise its rate soon, with some speculating the BSP could have raised its rate today while others are looking toward a March hike.
      Today's statement by the BSP's monetary board is more hawkish than its statement in December when it said it would remain vigilant against any risks to the inflation outlook and will adjust policy settings to ensure inflation is consistent with its target and still supports growth.
       "The monetary board stands ready to take appropriate measures as necessary to ensure that the monetary policy stance continues to support price and financial stability," the BSP said today.
       Interest rates globally are moving upwards in response to solid global growth and three central banks in Asia - South Korea, Malaysia and Pakistan - have already raised their rates in recent months.
       The BSP added that prospects for economic activity continue to be firm on the back of robust domestic demand and the sustained recovery in global economic growth.
       The Philippine economy grew by an annual rate of 6.6 percent in the final quarter of 2017, down from 7.0 percent in the third quarter.

Philippines maintains rate, inflation seen in target

       The Philippines' central bank kept its key overnight reverse repurchase rate (RRP) at 3.0 percent, as expected, saying inflation is still expected to remain within the government's target range for 2018 and 2019 despite trending upwards on higher utility rates and fuel prices.
        But Bangko Sentral ng Pilipinas (BSP), which has kept its monetary policy stance since September 2014 on "manageable" inflation, said the balance of risks to inflation continue "to lead toward the upside due to possible higher crude oil prices."
      In addition, a proposed tax reform and put temporary pressure on prices while a proposed reform in the rice industry and deregulation of rice imports could temper inflation.
      Inflation in the Philippines rose to 3.5 percent in October from 3.4 percent in September, within the target range of 3.0 percent, plus/minus 1 percentage point.
       In a briefing, BSP's Deputy Governor Diwa Guinigundo said the bank's forecast for 2018 average inflation had been raised to 3.4 percent from a previous 3.2 percent, while the outlook for 2017 and 2019 inflation was retained at 3.2 percent, according to press reports.
      On Monday the International Monetary Fund said the BSP's monetary policy stance remained appropriate but it should be ready to tighten if there were signs of overheating. It also said plans to unwind banks' high reserve requirements would help reduce macro financial risks but this should be done carefully to ensure that domestic liquidity is broadly unchanged.
      The BSP said the outlook for domestic economic activity remains firm, supported by positive sentiment among consumers and business and while credit is expanding in line with output growth, the central bank said it remains watchful over the implications of liquidity and credit conditions for price and financial stability.
       The Philippine economy expanded by an annual 6.5 percent in the second quarter, up from 6.4 percent in the first and the IMF forecast growth this year of 6.6 percent and 6.7 percent in 2018. Last year it grew 6.8 percent.
       The Philippine peso has depreciated slowly this year although it has bounced back in the last few weeks. Today the peso was quoted at 51.26 to the U.S. dollar, down 3.2 percent this year.
       Although the BSP's monetary policy stance has been steady since September 2014, the RRP rate was lowered by 100 basis points last year when it adopted an interest corridor system.

Philippines maintains rate, sees inflation in target range

      Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, kept its benchmark interest rate unchanged at 3.0 percent and said it expects inflation to remain within its target range this year and 2018 despite the recent increases in food and oil prices.
      BSP, which in June last year lowered its overnight reverse repurchase (RRR) by 100 basis points to 3.0 percent as part of a shift to an interest corridor system, added the balance of risks surrounding the inflation outlook continue to be to the upside given possible changes to electricity rates and the government's fiscal reform.
      "Meanwhile, uncertainty over global growth prospects continues to pose a key downside risk to the inflation outlook," the central bank said.
      Inflation in the Philippines rose to 2.7 percent in January, the highest since December 2014, but remains within the BSP's target range of 3.0 percent, plus/minus 1 percentage point.
     Inflation expectations are in line with the target, BSP added.
     The economy of the Philippines expanded by an annual rate of 6.6 percent in the fourth quarter of 2016, down from 7 percent in the preceding two quarters, and is expected to remain firm, helped by buoyant household consumption and private investment.
     Earlier this month the country's economic planning secretary, Ernesto Pernia, said the government was confident of hitting its 2017 growth target of 6.5-7.5 percent.
     However, the central bank also "stressed" that the global economic environment had become more challenging due to expected shifts in the policies of advanced economies and the normalization of U.S monetary policy.
     The Philippine peso has been trending downward against the U.S dollar since the "taper tantrum" of April 2013 but has been stable since November last year. Today the peso was trading at 49.9 to the dollar, largely unchanged from 49.6 at the start of this year.

Philippines holds rate, inflation risks remain to upside

    The central bank of the Philippines left the interest rate on its benchmark overnight reverse repurchase (RRP) facility at 3.0 percent as inflation is expected to slowly return to its target range in 2017 and 2018, but omitted the previous reference for the need for "prudence in policy settings" due to increased uncertainty over the prospects for growth and monetary policy in advanced economies.
    However, Bangko Sentral ng Pilipinas (BSP) added that it had taken into consideration the impact of changes to U.S. monetary policy on global financial markets and decided that maintaining its policy setting would give it more time to "assess evolving economic developments and calibrate its policy tools as appropriate."
    The central bank, which lowered the RRP rate by 100 basis points in June as part of shift to an interest rate corridor system, said the overall balance of risks to inflation remain tilted to the upside, a slightly more hawkish view than in September when it said that inflation risks appeared tilted to the upside. In August the BSP described the inflation risks as "broadly balanced."
    Inflation in the Philippines rose to a 2016-high of 2.5 percent in November from 2.3 percent in the two previous months but on average the central bank said inflation this year would be below its target range of 3.0 percent, plus/minus 1 percentage point.
     Inflation is expected to rise to the target range in coming years due to higher oil prices and strong domestic activity, with the pending petitions for changes to electricity rates and the impact of the government's fiscal reform program posing upside risks. But uncertainty surrounding the global economy pose downside risks, the BSP added.
    In a separate statement, the central bank said the government had maintained its inflation target of 3.0 percent for the years up to 2019-2020.
    The Philippine peso fell sharply from September to late November and since then it has been more stable. Today the peso was trading at 49.94 to the U.S. dollar, down 6 percent this year.
    The economy in the Philippines grew by a stronger-than-expected annual rate of 7.1 percent in the third quarter, up from 7.0 percent in the second quarter and the BSP expects domestic demand to remain firms, supported by "solid" household spending, higher government spending and adequate domestic liquidity.

Philippines keeps rate, risks to inflation still to upside

    The Philippine central bank left its benchmark overnight repurchase rate (RRP) steady at 3.0 percent, as widely expected, but said the "overall balance of risks surrounding the inflation  outlook remains tilted to the upside," a slightly more hawkish view than in September when it said the risk "appears" to be tilted to the upside.
    Bangko Sentral ng Pilipinas (BSP) has maintained its monetary policy stance since a rate hike in September 2014 though the RRP rate was lowered by 100 basis points in June as part of a shift to an interest rate corridor system.
    Although the central bank still considers inflation to be "manageable," it is slowly becoming more concerned over inflation after it in August described the balance of risks to inflation as "broadly balanced."
    This concern is echoed by economists and financial markets that are starting to expect the BSP to raise its rates in 2017 to curb inflation.
     Inflation in the Philippines rose to 2.3 percent in October, the same level as in September and the highest since March 2015 on higher food prices.
    The BSP confirmed that it expects inflation to average slightly below the lower edge of its target range this year and then rise toward the mid-point target in 2017 and 2018.
     The BSP targets inflation of 3.0 percent, plus/minus 1 percentage points.
    The risks to inflation stem from pending petitions for higher electricity rates and the government's proposed reform of taxes, BSP said.