MANILA, Nov. 19 (Xinhua) -- The Philippine central bank on Thursday cut the interest rate on overnight reverse repurchase facility by 25 basis points to 2.0 percent.
The Bangko Sentral ng Pilipinas (BSP) said the interest rates on the overnight deposit and lending facilities were likewise reduced to 1.5 percent and 2.5 percent, respectively.
The rates cut will be effective on Friday.
The last time that the BSP adjusted rates was in June, when it cut rates by 50 basis points, amid concerns that the economy was in for a record slump due to the COVID-19 pandemic.
"Latest baseline forecasts continue to indicate a benign inflation environment over the policy horizon, with inflation expectations remaining firmly anchored within the target range of 2 to 4 percent," the BSP said in a statement.
Average inflation is seen to settle within the lower half of the target band for 2020 up to 2022, reflecting slower domestic economic activity, lower global crude oil prices, and the recent appreciation of the Philippine peso.
"The balance of risks to the inflation outlook also remains tilted toward the downside owing largely to potential disruptions to domestic and global economic activity amid the ongoing pandemic," the BSP statement read.
Meanwhile, the BSP said uncertainty remains elevated amid the resurgence of COVID-19 cases globally.
However, the policy-making monetary board of the BSP also observed that global economic prospects have moderated in recent weeks.
At the same time, the board noted that while domestic output contracted at a slower pace in the third quarter of 2020, muted business and household sentiment and the impact of recent natural calamities could pose strong headwinds to the recovery of the economy in the coming months.
Given these considerations, the monetary board said there remains a critical need for continuing policy support measures to bolster economic activity and boost market confidence.
"With a benign inflation environment and stable inflation expectations, the Monetary Board sees enough policy space for a reduction in the policy rate at this time to uplift market sentiment and nurture the country's economic recovery amid increased downside risks to growth," the bank said. Enditem
