Philippine Central Bank Head Says There’s Still Room to Ease

Philippine central bank Governor Benjamin Diokno said the monetary authority still has room to further ease the policy rate even as he thinks the worst is over for the economy.

“We still have some room for monetary easing if there’s some need for it,” Diokno said Friday, adding that banks’ reserve requirement ratio remains high. The economy may have contracted about 9% last quarter and may see “possible growth” in the fourth quarter, he said, after a 16.5% drop in April to June.

Bangko Sentral ng Pilipinas is ready to lend more to government after 2020, the governor told Bloomberg TV’s Shery Ahn and Haidi Lun, adding he doesn’t see this is a threat to the authority’s independence. “For as long as there’s a crisis, we will continue to help the national government,” he said.

Philippines Gets $11 Billion From BSP With Promissory Notes

Policy makers kept the key interest rate unchanged at 2.25% on Thursday for a second straight meeting and approved an $11 billion cash advance to the government to help fund pandemic relief measures. That adds to a list of central-bank actions to support the economy, including 175 basis points of key rate cuts this year, a 200-basis-point reduction in RRR and government bond purchases in the secondary market.

Policy makers say the coronavirus-battered economy bottomed out in the second quarter, when it chalked up its steepest decline ever. However, high unemployment and a fall in consumer sentiment — to its weakest level on record in the third quarter — suggest easing measures have yet to filter through the real economy.

What Bloomberg’s Economists Say

“We anticipate the inflationary and currency risks — as well as that of limitless debt monetization — to be low given the safeguards in place.”

Justin Jimenez, Asia Economist

Bangko Sentral won’t intervene in the foreign exchange market even if the currency moves closer to the 48 to a dollar level, Diokno said. “We only intervene or we go into the market to ease volatility.”

The peso has risen 4.6% this year, beating all its peers in Asia. It climbed to its strongest level in almost four years in September. The currency is little changed at 48.45 at 10:23 a.m. local time.

Policy makers are next scheduled to set the key rate on Nov. 19.

— With assistance by Adrian Wong, Ditas B Lopez, and Cecilia Yap

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