ING Bank Manila sees a possible rate cut from the Bangko Sentral ng Pilipinas (BSP) during the third quarter of this year, as it considers the dovish stance of the Federal Reserve System (the Fed).
In a statement on Monday, ING Bank Manila Senior Economist Nicholas Antonio T. Mapa said the BSP could cut policy rates by a total of 50 basis points during the third quarter of this year, either in a phased manner of 25 bps in August and 25 bps in September, or via a single 50-bps rate cut in August.
“We have solidified our forecast for a policy cut at the 9 August meeting given [BSP] Governor [Benjamin E.] Diokno’s recent dovish tilt, and we are opening the possibility for a third easing for 2019. Governor Diokno shared that the decision to cut policy rates for a second time had been made prior to [the Fed Chairman Jerome] Powell’s recent testimony which foreshadows a possible third rate cut either at the September meeting,” Mapa said.
The ING Bank Manila also pointed out that the market can expect the BSP to trim reserve requirement ratios (RRR) at a nonpolicy meeting after the September policy meeting, possibly in a phased manner of 50 bps at the end of October, and another 50 bps either in November or December.
This is seen to bring the 2019 reduction in RRR possibly to 300 bps, the ING Bank Manila said.
It was explained that the Central Bank governor did indicate earlier that he would like to slash RRR further, but hinted that policy cuts would precede them as he gauges the impact of his recent phased RRR reduction first ordered in May 2019.
In May, the BSP’s Monetary Board (MB) moved to cut its deposit requirement on smaller banks in the system, after earlier cutting the rates for the universal and commercial banks RRR.
Monetary authorities decided to cut the RRR of thrift banks by 2 percentage points from 8 percent to 6 percent.
The implementation dates for the reduction are as follows: 100 basis points effective May 31; 50 basis points effective June 28; and, 50 basis points effective July 26, 2019.
The MB also cut the RRR of the universal and commercial banks by a total of 2 percentage points. As per implementation dates, about P95 billion will be released by end-May; about P47 billion by end-June 28; and another P47 billion by end-July.