BSP cuts rates by 0.5%

Effective today, the key benchmark interest rates will be lower by another 50 basis points, matching the move by the US Federal Reserve.

Interest rates have dropped by 550 basis points since December last year.

The drop in the key overnight borrowing rate, which now stands at 9.5 percent and the lending rate at 11.75 percent, is expected to spur economic growth.

The decision was made yesterday by the policy-setting Monetary Board.

In a statement yesterday, MB chairman and Bangko Sentral Governor Rafael Buenaventura cited several factors that led to the rate slash. These included the stability of the peso (which has been hovering at P50 to the dollar since the start of the week); manageable inflationary pressures (which grew by 6.7 percent in February and March this year); and stronger consumer demand.

Foreign exchange traders were, however, unimpressed with the MB’s monetary easing.

RCBC treasury head Jaime Panganiban said the rate cut was "very much in line with the Fed cut. In the long term, the rates will still flatten out."Another banker said the rate cut opens the door for some profit taking by foreign exchange traders. "The peso will continue to be driven by external forces," he said.

The peso closed yesterday at P50.06 to the dollar, slightly stronger than Wednesday’s P50.11 as the regional currencies continued to rally on the back of the Fed rate cut Weighted average yesterday was P50.054 to the dollar.