The Philippine central bank is likely to deliver its fourth interest rate cut in more than four months on Thursday after inflation resumed its decline to a one-year low in March, a Reuters poll showed on Monday. Chances the central bank would keep rates steady this week were diminished after prices rose at their slowest pace in a year in March at 6.4 percent, analysts said.
Nine out of 10 analysts surveyed by Reuters said the monetary authority would cut rates by a quarter percentage point this week to 4.5 percent for overnight borrowing, a fresh 17-year low. One analyst said the central bank might keep its policy rates on hold but reduce banks reserve requirements. Some bond traders also saw this weeks decision as a close call, saying currency swings and higher oil prices were likely to keep the central bank cautious.
"With inflation easing more rapidly than expected, the central bank has further room to cut interest rates at its upcoming policy meeting," HSBCs senior economist Frederic Neumann said.
"We now expect a 25 basis point cut, although more aggressive action beyond this appears unlikely at this stage," he said. The central bank has reduced interest rates by 1.25 percentage points since December to help soften the impact of the global recession on the Philippine economy. Of those predicting a rate cut, two said the central bank might complement the move with an easing of banks reserve requirements to boost liquidity and promote credit growth.