DBS sees one more interest rate cut

MANILA, Philippines — DBS Bank Ltd of Singapore said the Bangko Sentral ng Pilipinas (BSP) is likely to trim interest rates by another 25 basis points this year as central banks in the region continue to take steps to cushion economic growth amid persistent growth challenges.

In its weekly report titled “Asian central banks on the move,” DBS said central banks of the Philippines, China, India and Malaysia have taken accommodating measures, while South Korea and Indonesia have joined the fray.

Last May 9, the BSP slashed interest rates by 25 basis points due to the continued downtrend in inflation as well as the slower-than-expected gross domestic product (GDP) growth in the first quarter.

However, the BSP hit the pause button last June 20 to assess the impact of the previous rate cut as well as the lowering of the reserve requirement ratio for big and mid-sized banks by 200 basis points and for small banks by 100 basis points.

The next rate-setting meeting of the central bank’s Monetary Board is on Aug. 8.

DBS said it expects only a few more rate cuts in Asia as the US Federal Reserve is unlikely to embark on an extended rate cut cycle.

“Over the coming few quarters, we can expect more rate cuts from India, Indonesia, Malaysia, the Philippines and South Korea. Thailand and Taiwan buck the trend, but we suspect that pressure to loosen policy could build in the coming months,” the Singaporean bank said.

DBS said it expects the BSP to cut interest rates by another 25 basis points in the third quarter.

Inflation averaged 3.4 percent in the first half, falling within the BSP’s two to four percent target after easing to a 22-month low of 2.7 percent in June from 3.2 percent in May.

The BSP raised interest rates by 175 basis points in five rate-setting meetings from May to November last year to prevent inflation from spiraling out of control.

Inflation kicked up to 5.2 percent last year from 2.9 percent in 2017 due to elevated oil and food prices as well as weak peso.