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Philippine Central Bank Unexpectedly Cuts Interest Rate

Philippines' central bank on Thursday decided to slash its benchmark interest by 25 basis points, citing reduced price pressures and a shift in risks to inflation outlook to the downside. Economists had expected the bank to leave the rate unchanged.

The monetary board of the Bangko Sentral ng Pilipinas reduced the reverse repurchase or overnight borrowing rate to 3.75 percent from 4 percent, marking the third reduction so far this year. At the same time, the bank cut the overnight lending or repurchase rate by a quarter percent to 5.75 percent.

The central bank forecasts inflation to settle within the lower half of the 3-5 percent target for 2012 and 2013, as pressures on global commodity prices are seen to continue to abate amid weaker global growth prospects.

Philippines' annual inflation fell to a three-month low of 2.8 percent in June from 2.9 percent in the preceding month. Core inflation remained steady at 3.7 percent.

The central bank noted that while the Philippine economy can rely on the resilience of domestic spending to sustain growth, additional policy support would serve as a buffer against strong global headwinds.

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