Bangko Sentral cuts interest rates as growth slows down

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) trimmed interest rates by 25 basis points, as economic growth slowed down in the 2nd quarter of 2019.

The BSP Monetary Board on Thursday, August 8, brought down the benchmark policy rate to 4.25%. Interest rates on the overnight lending and deposit facilities were reduced to 3.75% and 4.75%, respectively.

The central bank's move was within analysts' consensus.

BSP Governor Benjamin Diokno said they reduced the rates as price pressures eased.

"Weaker global economic prospects continue to temper the inflation outlook. The potential adverse effects of a prolonged El Niño episode to inflation have subsided," Diokno said.

BSP economists revised their inflation outlook downward to 2.6% from 2.7% for 2019.

Meanwhile, the board did not discuss the reduction of the reserve requirement ratio (RRR).

Easing the interest rate creates a ripple effect across the economy. It generally means lower borrowing costs for consumers and would lead to people spending more. (READ: FAST FACTS: What does the Bangko Sentral ng Pilipinas do?)

More spending means higher demand for goods, which in turn boosts the economy over time. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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