NADI, FIJI—The Bangko Sentral ng Pilipinas (BSP) has room to cut interest rates and make borrowings cheaper once more amid slowing inflation and sustained robust economic growth, according to the regional macroeconomic surveillance organization Asean+3 Macroeconomic and Research Office (Amro).
During the launch of Amro’s Asean+3 Regional Economic Outlook (Areo) 2019 report on the sidelines of the Asian Development Bank’s (ADB) 52nd Annual Meeting, its chief economist Hoe Ee Khor noted that when consumer prices in the Philippines and Indonesia were “under pressure” last year, their central banks “took up the rates very sharply, very aggressively.”
“They wanted to be proactive, front-loaded and ahead of the curve,” Khor said.
The BSP hiked key rates by a total of 175 basis points last year as headline inflation hit a 10-year high of 5.2 percent amid new or higher excise taxes slapped on consumption, elevated global oil prices, and domestic food supply bottlenecks.
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But Khor said that using the “Taylor Rule”—a widely used tool that assesses where the monetary policy should be—the current policy rate in the Philippines of 3.75 percent was “ahead of where [the rate] should be.”
“For countries like Indonesia and the Philippines, there is monetary policy space. There is space to cut [interest rates] if the condition is right, depending on how the economy goes,” he said.
