RP cuts rates, more likely

RP cuts rates, more likely

MANILA (Reuters): The Philippine central bank said on Thursday it would cut key overnight rates by 50 basis points, effective Monday, following relatively benign inflation in February and a stable outlook for the peso.

Money market dealers said the cut was largely anticipated and that another 50 bps reduction was likely after March 20, when the U.S. Federal Reserve is seen likely to slash its own rates.

"The Monetary Board took into account the broad stability in the foreign exchange market, comfortable interest rate differentials and favorable inflationary expectations in the second half of the year in reaching its decision," central bank governor Rafael Buenaventura told reporters after a meeting of the policy-making Board.

The latest cut would take the overnight borrowing rate to 10.5 percent and overnight lending to 12.75 percent.

A tiering system would remain in place for overnight borrowing, with the first five billion pesos placed with the bank by any one institution attracting 10.5 percent, the next five billion 9.0 percent and any subsequent placements 7.5 percent.