The Bangko Sentral ng Pilipinas (BSP) has reduced the rates on its discount window facility (DWF) for the month of February, consistent with the central bank’s gradual monetary policy easing.
Effective on Feb. 10, the rate on the 1 to 90-day peso-denominated loans is cut further to 6.9225 percent from 6.9529 percent previously.
For the 91-180 days, the rate is also lower at 7.0950 percent from 7.1558 percent last month.
The DWF replaced the peso rediscounting facility in December. The new DWF interest rates are based on the BSP overnight lending rate, while the US dollar and Japanese yen rates are pegged on the applicable benchmark rates.
The BSP said the appropriate spread on DWF interest rates may be changed periodically based on the BSP’s monetary policy direction and to “reflect movements in market interest rates.”
Meanwhile, the rate for the US dollar-denominated DWF is slightly higher at 6.80280 percent for the 1-90 days, 91-180 days and 181-360 days. The previous rate was 6.80200 percent.
For the yen-denominated loans, the rates are as follows: 2.58087 percent for the 1-90 days; 2.61828 percent for the 91-180 days; and 2.72625 percent for the 181-360 days.
The BSP replaced the rediscounting facility with the DWF to enable banks to directly offer government-issued securities and central bank bills in exchange for advances against these securities.
Based on BSP Circular No. 1202 which implemented the DWF, this will allow the facility to influence the volume of credit. Before the circular, the BSP only rediscounts loans with government securities as additional collateral.
The BSP said banks with existing rediscounting line may continue with the rediscounting of eligible credit instruments until they expire.
However, banks with existing rediscounting line planning to avail of advances against securities issued by the government and the BSP will have to apply for a DWF line. This will be treated as a new application.
The BSP’s Monetary Board reduced the key rate or the target reverse repurchase rate by a cumulative 75 basis points (bps) to 5.75 percent in 2024. It also cut the overnight deposit rates to 5.25 percent, and the lending facilities to 6.25 percent.
BSP Governor Eli M. Remolona Jr. has said that while they will maintain a measured approach in monetary policy easing this year, it is not likely that they will reduce the policy rate by as much as 100 bps.
Private sector analysts surveyed by the BSP expect the Monetary Board will cut the policy rate by at least 50 bps up to 100 bps with a manageable inflation outlook.
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