BSP still ‘hawkish’ but rate cut possible in 2024
The Bangko Sentral ng Pilipinas (BSP) could start easing its ultra-tight monetary policy settings this year, although it might be too early to cut the policy rate in the first semester, Governor Eli Remolona Jr. said.
But the BSP chief said the central bank was staying “hawkish” for now.
“Yes, within the year. Maybe first semester is too soon. But we’ll see,” Remolona said in an interview during the BSP’s annual reception for the banking community on Friday.
Already, analysts were expecting the BSP to start cutting rates in the middle of the year—the timing and magnitude of which, they said, would likely match the possible easing moves in the United States to avoid pressuring the peso and stoking inflation via costlier imports.
Despite inflation easing back to within the BSP’s 2 to 4 percent target in December last year after hovering above that range for 20 months, the BSP said it deemed it necessary to “keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes evident.”
At its last meeting for 2023, the powerful Monetary Board kept the BSP’s policy rate unchanged at 6.5 percent, the tightest in 16 years.
This is so far the clearest signal from the BSP chief about the possible timing of the central bank’s rate cut. Earlier this month, Remolona said the beginning of the easing cycle was “possible, but not likely” in the first half of 2024.
But the BSP chief said monetary authorities were nevertheless staying “hawkish,” adding that there would be more room to hike further, if necessary, if the 2023 gross domestic product number turns out good.
For Remolona, the economy likely performed better in the fourth quarter of 2023 than the preceding quarter’s forecast-beating growth of 5.9 percent.
