Philippine Central Bank Refrains From Rate Cut

The Monetary Board of the Bangko Sentral ng Pilipinas, or BSP, on Thursday, retained the overnight reverse repurchase facility rate at a record low 2.25 percent.

The interest rates on the overnight deposit and lending facilities were also kept unchanged at 1.75 percent and 2.75 percent, respectively.

The bank had reduced its key rate by 50 basis points each in June, April and March and by 25 basis points in February.

The central bank said today's decision was based on its assessment that the inflation environment remains benign.

"The balance of risks to the inflation outlook also leans toward the downside from 2020 until 2022 owing largely to potential disruptions to domestic and global economic activity amid the ongoing pandemic," the bank said.

Today's decision likely marks a pause rather than an end to the easing cycle, Alex Holmes, an economist at Capital Economics, said.

Inflation is no barrier to further easing. While the headline rate has risen in recent months, to 2.7 percent in July, it is still below the mid-point of the BSP's 2-4 percent target band, the economist noted.

In the second quarter, the economy had entered a recession after the gross domestic product contracted at the fastest pace since 1981. Gross domestic product fell 16.5 percent on a yearly basis.