BSP cuts interest rates by 50 bps

THE Bangko Sentral ng Pilipinas (BSP) slashed interest rates by half a percent on Thursday, March 19, in an effort to soften the economic impact of the Covid-19 outbreak.

The Monetary Board (MB) pulled down the key interest rate to 3.25 percent, 50 basis points (bp) lower than the current level to lower cost of borrowings.

“With a manageable inflation environment and stable inflation expectations, the Monetary Board sees enough policy space for an assertive reduction in the policy rate at this juncture to cushion the country’s growth momentum and uplift market confidence amid stronger headwinds. The monetary policy easing is also aimed at mitigating the risk of financial sector volatility in light of unfolding global developments by ensuring adequate domestic liquidity and credit in the financial system as well as lowering borrowing costs for affected firms and households,” the BSP said in a statement, Thursday.

The MB also authorized the time-bound, temporary relaxation of BSP regulations on compliance reporting by banks, calculation of penalties on required reserves and single borrower limits.

It also approved a temporary reduction in the term spread on Peso rediscounting loans relative to BSP’s overnight lending rate to zero. As such, the applicable rediscount rate for loans under the Peso Rediscount Facility has been set at 3.75 percent, regardless of loan maturity (i.e., 1 to 180 days).

The said Peso rediscount rate shall be effective for a period of 60 days from March 20, 2020 or until May 19, 2020, subject to further extension as may be approved by the MB.

Meanwhile, the applicable rediscount rates for loans under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) for the month of March 2020 remain as follows:

Loan Maturity Rate (%)

Dollar Yen

1 - 90 days 4.40925 2.87050

91 - 180 days 5.35575 3.81700

181 - 360 days 7.24875 5.71000

The EDYRF rates are based on the 90-day London Inter-Bank Offered Rate plus a spread depending on the term of the loan. (PR)