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BSP to cut rates by 50 basis points -- Bank of America-Merrill Lynch

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MANILA, Philippines -- Bank of America-Merrill Lynch on Thursday said it sees local monetary authorities cutting key interest rates by as much as 50 basis points this year to keep the local economy from spiraling down amid a threat of a deep recession in Europe and US.

The Bangko Sentral ng Pilipinas has kept its key rates steady at 4.5 percent and 6.5 percent for the overnight borrowing and lending windows since last year, but has hinted of an easing when its policy-making Monetary Board meets next week.

The BofA-Merrill Lynch said central banks in the ASEAN region have enough elbow room to aggressively respond via monetary and fiscal policy if the current downturn worsens. The Philippines, together with its neighbors, should err on the side of caution and cut rates since inflation has begun to ease while remittances would still remain as a “stabilizing force” that has been fueling domestic consumption.

“Only foreign public debt (27.2 percent of gross domestic product) and fiscal deficit (3.7 percent of GDP) looks higher within Southeast Asia but remain at levels that are relatively low by international standards,” the bank said.

 

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