THE Bangko Sentral ng Pilipinas (BSP) may keep its easing cycle alive well into next year, hoping to jolt an economy weighed down by weak business sentiment and sluggish public spending — local pressures that have begun to eclipse external risks.
Miguel Chanco, chief emerging Asia economist at London-based Pantheon Macroeconomics, called last week’s surprise quarter-point rate cut a “rude, if long overdue, awakening” for monetary authorities who had earlier declared they had hit the sweet spot when the benchmark rate was trimmed to 5 percent in August.
He noted that the soft business confidence now worrying the central bank had been festering long before the infrastructure spending scandal started to rattle the stock market and put a chill on investment plans.
For this reason, Chanco said he had been “downbeat” on economic growth, which he expected to come at a low of 5 percent this year against the government’s target of between 5.5 and 6.5 percent.
“We never bought into Governor Eli Remolona Jr.’s talk of a ‘sweet spot’ in August and, with corporate sentiment going from underwhelming to outright miserable, we reckon more monetary easing is in the pipeline until early next year,” he said in a note to clients.
He added: “We still see a 25-basis point (bp) cut in December and we’ve added an additional reduction in the first quarter, taking the target reverse repo rate to a terminal 4.25 percent.” (Ian Nicolas P. Cigaral © Philippine Daily Inquirer)
