HSBC: BSP in for ‘tough call’ in June meet
The Bangko Sentral ng Pilipinas (BSP) might still hit the pause button again in June despite the softer inflation print in May, HSBC said while stressing that the next monetary policy decision would be a “tough call” amid global trade uncertainties.
In a commentary, HSBC said its baseline scenario was still for the BSP to keep the key rate unchanged at 5.5 percent once the powerful Monetary Board holds its next policy meeting on June 19.
The British banking giant cited the wait for more details on the proposed tariff measures of the United States.
But HSBC acknowledged that the softer May inflation print in May increased the chances of further easing this month, more so with global conditions keeping a lid on goods and energy prices.“The BSP does have the privilege to take a measured approach given how insulated the economy is to any headwind in trade,” Aris Dacanay, economist at HSBC, said.
“However, with inflation floating well-below the BSP’s forecast range, the risk of a policy rate cut in June has substantially increased, more so with 1Q 2025 growth surprising to the downside,” Dacanay added.
The consumer price index (CPI) in May rose 1.3 percent year-on-year, slightly below the preceding month’s annual increase of 1.4 percent. This marked the lowest inflation rate since November 2019, when it stood at 1.2 percent.
The latest reading was correctly predicted by an Inquirer poll of economists. At the same time, the figure settled within the forecast range of the BSP, which had pegged last month’s CPI at 0.9 to 1.7 percent.
Since the beginning of the year, inflation has averaged 1.9 percent, undershooting the 2 to 4 percent target band of the central bank. BSP Governor Eli Remolona Jr. had said there was “plenty of room” to reduce borrowing costs, adding that at least two more rate cuts were likely on the table this year.
“The peso’s relative strength may have also given the BSP room to cut policy rates regardless of whether the [US Federal Reserve] cuts rates or not,” Dacanay said.
“That being said, the 19 June Monetary Board meeting will likely be a tough call,” he added.
