August BSP rate cut still ‘on the table,’ says Remolona
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said on Tuesday another interest rate cut was “on the table” for next month, maintaining a dovish stance as he expects only a “modest” impact from the new US tariff on the Philippines.
Speaking to reporters, Remolona said the upcoming release of key economic data—including July inflation and second-quarter gross domestic product (GDP) figures—would help guide the Monetary Board’s (MB) decision at its next policy meeting on August 28.
Remolona also addressed the newly announced 19-percent US tariff on Filipino goods, saying it helped remove some of the uncertainty that previously concerned the BSP.
He noted that the negotiated rate was unlikely to significantly affect the country’s GDP growth.
“It’s good because it clarified the tariff situation,” he said.
“We’re not a big trading economy, so that limits the impact on us. But growth is already slowing down globally, so that can have some effect. Oil prices are down, so that’s good for inflation,” he added.
Hard question
Asked whether he still expects to end the current easing cycle this year—as he had previously signaled—Remolona said the central bank has yet to pin down the “Goldilocks” rate: a hypothetical policy rate that is neither inflationary nor restrictive to economic growth.
“It’s a hard question,” the central bank chief said.
“Our estimates of the Goldilocks rate are imprecise. We have to look at all sorts of other data. But if we knew what it was exactly, then we’d stop there. But we don’t know what it is exactly,” he added.
At its meeting last June, the MB trimmed the policy rate, which banks use as a guide when pricing loans, by a quarter point to 5.25 percent.
It was a widely expected decision that brought the cumulative rate reductions under the current easing cycle to 1.25 percentage points. Remolona previously said the central bank may cut the policy rate twice more before the end of 2025 amid the benign inflation environment.
The MB has three more policy meetings scheduled this year—in August, October and December.
By the time the MB meets again next month, the US Federal Reserve (Fed) will have already concluded its policy meeting on July 30. The Fed is widely expected to keep interest rates unchanged, a move that could place downward pressure on the peso.
Remolona said the central bank was closely monitoring the inflationary effects of a weaker peso.
“As you know, we don’t have a target for the peso,” he said. “I’m more concerned about its potential impact on inflation.”
