Philippine central banker sees more easing as graft woes weigh

[MANILA] The Philippine central bank may cut its key interest rate again in December and further next year, as the economic fallout from a corruption scandal may linger to the end of 2026, an official said.

“I would expect another 25 basis points cut” at the next meeting in December, Bangko Sentral ng Pilipinas (BSP) Monetary Board member Benjamin Diokno said in an interview with Bloomberg Television’s Avril Hong on Monday (Oct 27).

Further rate cuts are possible, “maybe sometime next year”, as policymakers assess economic growth and employment data, with inflation under control, according to Diokno.

The BSP reduced its benchmark interest rate by a quarter point this month as a corruption scandal in the government’s flood-control projects threaten the country’s economic outlook. Its next rate-setting meeting is scheduled for Dec 11.

Diokno, who once helmed the central bank as well as the finance and budget departments, said that the economy may “slow down a bit” due to the corruption controversy and trade uncertainties. He said that 2026 will be “a transition period” as President Ferdinand Marcos Jr fixes the problem.

In July, Marcos exposed corruption in flood-control projects worth billions of pesos. Many of the projects were either substandard or non-existent, leading to investigations that have implicated key public works officials and several lawmakers, who have denied wrongdoing. The allegations fuelled a broad exit by foreign investors in the stock market.

“We will probably be able to recover from this mess by the end of next year. And in 2027 and 2028, we will be back on track.”, Diokno said.

The Philippine peso last week fell to its lowest level against the US dollar since February. It was little changed at 58.635 at 11.05 am in Manila on Monday. The benchmark stock index was down 1.3 per cent.

Diokno said that the central bank will only intervene in the foreign exchange market if the peso’s weakness affects the BSP’s inflation target range of 2 to 4 per cent. “The BSP does not target a specific rate,” he said. BLOOMBERG