Philippines cuts key rate in off-cycle move as recession looms

MANILA — The Philippine central bank on Thursday slashed the key interest rate by 50 basis points in an off-cycle monetary easing move to support the economy amid a possible recession.

The move, which brings the benchmark interest rate to 2.75%, takes effect on Friday, Gov. Benjamin Diokno told reporters.

The policy action was taken “to further support the economy during this extraordinary time,” Diokno said on Twitter.¬†“This is to strongly encourage lending to various sectors, especially to the most vulnerable, amid the COVID-19 pandemic.”

The move comes ahead of the monetary policy announcement on May 21, and follows a 50-basis point reduction on March 19. The Philippines has made 125 basis points worth of cuts this year.

Diokno, who has vowed to do “everything necessary” to save the economy from recession, had earlier dismissed off-cycle policy moves. But he changed course as a deeper fallout from the coronavirus loomed.

Finance Secretary Carlos Dominguez said the economy could shrink 0.8% or post zero growth at best this year.

The country has implemented drastic measures to fight the spread of the virus. Philippine President Rodrigo Duterte has locked down main Luzon Island, which accounts for around 75% of the country’s economy, to April 30. As of Thursday, the Philippines had recorded 5,660 cases, the highest number in Southeast Asia.

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