Philippines set to cut interest rates again

Bloomberg

Central banks in the Philippines and Thailand will grapple with mounting global risks when they decide interest rates this week, keen to bolster their economies against slower growth.
Thailand was expected to keep interest rates unchanged on Wednesday after a surprise reduction last month, while a day later the Philippines will probably lower its benchmark rate for a third time this year, by 25 basis points.
Already hurt by the US-China trade war and uncertainty over Brexit, the global outlook has darkened in recent weeks amid an oil-supply shock and volatile money markets.
As global challenges rise, Asian governments are focusing on supporting domestic sources of growth.
“Economic concerns will be top priority as inflation continues to be soft,” said Jessie Lu, an economist at Continuum Economics in Singapore. “We expect more monetary support coming out of Asia.”
She predicted that slowing growth will prompt a rate cut in the Philippines this week. While the Thai central bank is likely to hold steady on Wednesday, “weakness in external demand” may result in a rate cut later this year, Lu said.
Twenty-one of 29 economists surveyed by Bloomberg expect the Bank of Thailand to hold its key rate after surprising analysts last month with its first cut in more than four years.
A weakening economy, strong local currency and benign inflation suggest scope for more easing. But the Thai government is stepping up efforts to bolster growth, which could allow the central bank to pace its easing to avoid financial-stability concerns.
“The government’s fiscal stimulus could give time for the central bank to assess the impact of its move,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore.
“Even so, weakening domestic demand could lead BOT to keep the door open for further easing down the line.”