“Ahead, rather than behind the curve.”
Thus said Bangko Sentral ng Pilipinas Governor Benjamin Diokno in a text message to the Inquirer on Thursday (Feb. 6) after the policy-making Monetary Board decided to cut interest rate by a quarter of a percentage point.
While the rate cut was widely expected by financial markets, the central bank’s reason for doing it signaled a major shift in the way the regulator — previously influenced mainly by lagging economic data — would decide on monetary policy as the days pass.
“The Monetary Board concluded that the manageable inflation environment allowed room for a preemptive reduction in the policy rate to support market confidence,” Diokno said at a press briefing announcing the Monetary Board’s decision to cut interest rate on the BSP’s overnight reverse repurchase facility by 25 basis points to 3.75 percent.
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The interest rates on overnight lending and deposit facilities were reduced to 4.25 percent for overnight lending and 3.25 percent for deposit facilities.
“While recent demand indicators still point to a firm outlook for the domestic economy, the Monetary Board believes that a policy rate cut would provide additional policy support to ward off the potential spillovers associated with increased external headwinds,” Diokno said.
