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Philippines to Cut as Thailand Holds: Rate Decision

Siegfrid Alegado and Suttinee Yuvejwattana
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Philippines to Cut as Thailand Holds: Rate Decision

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Central banks in the Philippines and Thailand will grapple with mounting global risks when they decide interest rates this week, keen to bolster their economies against slower growth.

Thailand is expected to keep interest rates unchanged Wednesday after a surprise reduction last month, while a day later the Philippines will probably lower its benchmark rate for a third time this year, by 25 basis points.

Already hurt by the U.S.-China trade war and uncertainty over Brexit, the global outlook has darkened in recent weeks amid an oil-supply shock and volatile money markets. As global challenges rise, Asian governments are focusing on supporting domestic sources of growth.

Central Banks in Asia Take Spotlight With Flurry of Policy Meetings

“Economic concerns will be top priority as inflation continues to be soft,” said Jessie Lu, an economist at Continuum Economics in Singapore. “We expect more monetary support coming out of Asia.”

She predicted that slowing growth will prompt a rate cut in the Philippines this week. While the Thai central bank is likely to hold steady Wednesday, “weakness in external demand” may result in a rate cut later this year, Lu said.

Here’s what to watch for from this week’s rate decisions:


Twenty-one of 29 economists surveyed by Bloomberg expect the Bank of Thailand to hold its key rate Wednesday after surprising analysts last month with its first cut in more than four years.

A weakening economy, strong local currency and benign inflation suggest scope for more easing. But the Thai government is stepping up efforts to bolster growth, which could allow the central bank to pace its easing to avoid financial-stability concerns.

“The government’s fiscal stimulus could give time for the central bank to assess the impact of its move,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “Even so, weakening domestic demand could lead BOT to keep the door open for further easing down the line.”

The Thai government launched a $10 billion stimulus package last month to help push growth toward its 3% goal. More measures may be deployed if needed, Finance Minister Uttama Savanayana said earlier this month.


All but two of economists in a Bloomberg survey predict Bangko Sentral ng Pilipinas will cut its benchmark rate by a quarter point to 4% Thursday, looking to boost an economy growing at its weakest level in more than four years.

“Given the dovishness of BSP officials and the declining inflation rate, it seems ripe for the central bank to reduce rates this month,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore.

Governor Benjamin Diokno indicated last week he’s ready to cut rates again, telling Bloomberg Television that inflation may slow to a three-year low of 1.4% in September, giving policy makers space to roll back last year’s monetary tightening.

Philippine Central Bank Chief Says May Cut Rates Again Next Week

Analysts will parse the BSP’s statement for clues on the growth trajectory and risks moving forward.

“The BSP may choose to accelerate next year’s easing policies by conducting a fourth rate cut in the fourth quarter,” Lee said, citing a “deteriorating” global economy and easing pressure from other Asian central banks.

(Corrects rate estimate in 11th paragraph.)

--With assistance from Tomoko Sato.

To contact the reporters on this story: Siegfrid Alegado in Manila at aalegado1@bloomberg.net;Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michael S. Arnold

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