25bps cut in overnight borrowing rate looms over Philippines

It's a 'logical move' to ascertain competitiveness in the country's export segment.

According to DBS, the central bank (BSP) is expected to cut the overnight borrowing rate (OBR) by 25bps to 3.50% today.

Here's more from DBS:

The deterioration in export numbers have become more apparent now that non-electronics manufactures have also started to waver.

This was the case in August when this component suffered a 30% MoM decline, led by a fall in machinery and transport equipment exports.

Coupled with depressed electronics exports, BSP is likely to take further insurance against a continued slowdown in external demand. Inflation conditions remain benign and there are no immediate risks of price pressures.

For the rest of this year, headline inflation is projected to stay below 4%. More recently, BSP’s rhetoric has also started to focus on the strength of the peso. In order to curb excessive speculative inflows, BSP had taken steps to limit access to its special deposit accounts (SDA).

However, with the peso still relatively strong and external demand starting to ease, a rate cut would be a logical move to ensure export competitiveness.

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