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Philippines May Cut Key Interest Rate
Karl Lester M. Yap & Michael Munoz | January 18, 2012

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The Philippines may cut interest rates for the first time since July 2009, joining nations from Australia to Thailand in easing monetary policy as Europe’s debt crisis curbs economic growth.

Bangko Sentral ng Pilipinas will reduce the rate it pays lenders for overnight deposits by a quarter of a percentage point to 4.25 percent, according to 13 of 17 economists surveyed by Bloomberg News ahead of a decision today The rest expect the benchmark to be left unchanged at 4.5 percent.

Lower borrowing costs may aid President Benigno Aquino’s efforts to boost growth as he increases spending and seeks investment for roads and airports. The Philippine Stock Exchange Index rose to a record this month and became the best performer among 19 Asian share indexes tracked by Bloomberg in the past six months as investors bet policy makers will take steps to stimulate growth and counter faltering global demand.

“Conditions are right for the cut,” said Trinh Nguyen, a Hong Kong-based economist at HSBC Holdings. “Across Asia, inflation is on the downward trend. Growth concerns are enough to motivate the BSP to give a lending hand.”

The World Bank cut its global growth forecast by the most in three years this week, saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets such as India and Mexico.

Growth in Asian economies is faltering as Europe’s debt woes hurt the region’s exports. China on Tuesday reported its weakest expansion in 10 quarters. The Philippines’ $200 billion economy expanded 3.2 percent in the third quarter from a year earlier, holding near the 3.1 percent pace in the previous three months that was the slowest since 2009.

Bangko Sentral Governor Amando Tetangco said last week that he anticipates easing monetary policy this quarter should Europe’s sovereign-debt crisis further damp the growth outlook.

Policy makers may cut the benchmark rate or reduce banks’ reserve ratio as the central bank forecasts inflation this year and next will average closer to the low-end of a 3 percent to 5 percent target, he said.

Bloomberg