Inflation falls back to 1.5%, still beneath the 2-4% target band. As predicted, the central bank cut the key rate by 0.25%. Trade deficit is narrowing, but don’t judge too soon.
Mixed news this month; positive in some areas, negative in others. We’re neither especially bearish, nor bullish – but it is clear that the infrastructure project corruption scandal has had deep and wide-ranging impacts. Inflation & Interest Rates In September we said that we “continue to anticipate at least one further interest rate cut inside this year, possibly two.” In last month’s report we went further and not only predicted an 11th December cut to the key rate but also said that “any cut will likely be no more than 0.25% to the current 4.75% rate”. And so it was that on 11th December the Bangko Sentral ng Pilipinas’ (BSP) did indeed cut the Target Reverse Repurchase (RRP) rate by 25bps from 4.75% to 4.50%, and also lowered overnight deposit and lending facility rates to 4.00% and 5.00% respectively....
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