THE Bangko Sentral ng Pilipinas (BSP) on Thursday cut its policy rate by 25 basis points, bringing it down to a new historic low of two percent, amid the continued economic slump.
The rate cut was widely unexpected as the central bank had earlier said it was in no rush to further reduce borrowing costs despite the economic fallout caused by the Covid-19 pandemic.
The last time that the BSP adjusted rates was in June, when it cut rates by 50 basis points.
The BSP has reduced interest rates by a cumulative 200 basis points this year, and cut the reserve requirement ratio (RRR) for banks by 200 basis points to 12 percent.
The central bank has been trying to entice businesses and consumers to borrow more money to stimulate the economy by cutting rates, but banks have become more reluctant now.
The BSP’s third quarter survey of senior bank loan officers showed that banks are tightening credit standards, making it harder to borrow money by raising collateral and other requirements.
The Philippine economy has contracted 9.7 percent in the first three quarters of the year, recording its deepest slump in decades. / CSL