By Central Bank News
The central bank of the Philippines cut interest rates by 25 basis points to 3.75 percent, as expected by some economists, the third time this year the Bangko Sentral Ng Pilipinas has cut rates.
Lower inflation allowed the bank to cut rates to help buffer the economy against a weaker global economy, the bank said in a statement.
“On balance therefore the benign inflation outlook provides room for a reduction in policy rates as a pre-emptive move against the risks associated with the global slowdown,” the bank said.
The Philippine inflation rate eased to 2.8 percent in June from 2.9 percent and gross domestic product rose by 6.4 percent in the first quarter from the same quarter last year.
The Philippine central bank has a medium-term inflation target of 4 percent, plus or minus one percentage points for 2012-2014.
The bank said price pressures have been receding and the risk is to the downside as pressures on commodity pressures are abating due to the weaker global outlook.
“In the advanced economies, financial market stress continues to build up, and there remain concerns about the prospects for urgent fiscal adjustments and reforms. While the Philippine economy can rely on the resilience of domestic spending to sustain growth, additional policy support would serve as a buffer against strong global headwinds,” the bank said.
The Philippine central bank’s overnight borrowing, or reverse repurchase rate facility (RRR), was cut to 3.75 percent, and it also cut the overnight lending or repurchase facility (RP) by the same amount to 5.75 percent. The overnight borrowing rate was already cut in January and March, each time by 25 basis points.
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