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The Philippines central bank cuts interest rate to protect economy from coronavirus impact

By Ramla Soni

The central bank lowered the rate on its overnight reverse repurchase facility by 25 basis points to 3.75 per cent

The Philippines' central bank has cut its key interest rate to protect the economy from the impact of the coronavirus epidemic. It says it is prepared to loosen policy further to protect growth.

The central bank lowered the rate on its overnight reverse repurchase facility by 25 basis points to 3.75 per cent. This is the fourth such move since it began reversing policy rate hikes in 2018 to better the economy.

“The manageable inflation environment allowed room for a pre-emptive reduction in the policy rate to support market confidence,” Bangko Sentral ng Pilipinas governor Benjamin Diokno said.

Diokno estimated the virus outbreak could shave up to 2 percentage points off first quarter growth and 4 percentage points off second quarter growth.

The government has set a 6.5-7.5 per cent growth target for the year.

Earlier, India’s central bank kept rates on hold but worries about the economic impact of the coronavirus has raised the chances of further monetary loosening across the region this year.

Although this year’s inflation estimate was raised to 3 per cent from 2.9 per cent forecast in December, the forecast remains well inside the central bank’s 2-4 per cent target range for this year and next. Next year’s inflation estimate was kept at 2.9 per cent.

The Philippines is preparing for the economic fallout from the coronavirus epidemic which has prompted various governments to impose travel and trade restrictions.

The virus has killed 563 people, including a Chinese man in the Philippines, the first fatality outside China.

The peso closed at 50.78 to the dollar, firmer than yesterday’s close of 50.92.

FURTHER READING: India’s central bank keeps interest rates the same and revises GDP forecast

FURTHER READING: Singapore central bank and JP Morgan develop multi-currency blockchain prototype

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