Philippines Bank may cut rate

MANILA: The Philippines central bank said Wednesday that there was still a chance it could cut interest rates by another 25 basis points to boost economic growth.

The bank said in its monthly newsletter that if inflation -- which eased to 4.8 percent last month from 6.4 percent in March -- continues to be benign it would have room to cut rates.

The overnight borrowing rate now stands at 4.5 percent and the overnight lending rate is at 6.5 percent, both 17-year lows.

The bank's models "suggest that the policy rate may still be reduced in favour of a minimal increase in growth without breaching the inflation target in 2009 and 2010." It said a 25-point cut this year and next would raise average inflation only marginally, by just 0.007 percentage points and 0.014 percentage points respectively, and keep it well within the target ranges for 2009 and 2010.

Inflation is well down from the 8.3 percent seen in April last year.

The bank's Monetary Board cut its policy rates by 75 basis points in the first three months of this year, bringing the cumulative monetary easing to 125 basis points since December.

It will announce its next decision after meeting on May 28, when the government will also release economic growth data for the three months to March.