[ad_1]
Stock brokerage SB Equities Inc. expects Bangko Sentral ng Pilipinas (BSP) to halt rate cuts amid an already accommodative interest rate environment.
SB Equities said in a report that it expects the central bank to be less accommodating once inflation rises to 3 percent and the recovery in growth picks up speed in the second half of next year. That is, in anticipation of the availability of a vaccine against the coronavirus disease 2019 (COVID-19).
“We believe that monetary policy action should be complemented by a viable fiscal response, which together will be key to economic recovery,” said SB Equities.
On Thursday, the central bank opted to cut interest rates again, by 25 basis points, as the economy continues to contract.
The interest rate on the overnight deposit is now 2 percent. Likewise, the interest rates on demand deposits and credit facilities were reduced to 1.5 and 2.5 percent, respectively.
In a statement, BSP Governor Benjamin Diokno said that the Monetary Board observed that the global economic outlook has moderated in recent weeks amid the resurgence of COVID-19 cases.
Diokno said that the Monetary Board noted that “although national production contracted at a slower rate in the third quarter of 2020, the moderation in business and family confidence and the impact of recent natural calamities could represent strong obstacles to the recovery of the economy in the coming months. “
“Given these considerations, the Monetary Board assessed that there remains a critical need for continued policy support measures to boost economic activity and increase market confidence,” Diokno said.
“With a benign inflation environment and stable inflation expectations, the Monetary Board sees enough policy room for a reduction in the policy rate at this juncture to raise market confidence and nurture the country’s economic recovery amid increased risks. down for growth, “he added.
