BSP chief sees ‘good chances’ of quarter-point rate cut in April
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said there’s a “good chance” of a quarter-point interest rate cut in April, as inflation continues to ease while the peso becomes less and less of a problem for monetary authorities.
“Yes, there’s a good chance that we will cut by 25 basis points in April,” Remolona said in an interview with Bloomberg on Tuesday. He cited tame inflation and a less volatile peso that had reduced the need for the BSP to intervene in the spot foreign exchange market recently.
“We are on an easing cycle,” the BSP chief added.
Should the majority of the seven-member Monetary Board (MB) agree with Remolona, the Philippines would see the resumption of its “calibrated” rate-cutting cycle on April 10.
Back when the MB had held its first policy meeting for this year last February, the benchmark rate that banks typically use as a guide when pricing loans was kept at 5.75 percent, defying market expectations.
Remolona had admitted that the pause was not an easy decision for monetary authorities, who were very wary of uncertainties coming from a slew of tariff actions in the United States.
Instead, the BSP had decided to deliver another jumbo cut to the reserve requirement ratio (RRR) of banks, releasing over P300 billion in additional loanable funds to the country’s growing economy.
But after inflation posted a slower-than-expected print of 2.1 percent in February, many analysts believed that the BSP might resume cutting interest rates soon to support an economy that had grown below the government’s target last year.
In the same Bloomberg interview yesterday, Remolona said the RRR—currently at 5 percent for big banks—was still too high, suggesting that further cuts were possible.
But he explained that the BSP must carefully decide on the timing of the future RRR reductions to avoid flooding the economy with too much liquidity that can fan inflation.
“For us, this requirement is a distortionary measure so we’d like to reduce it to as low as zero,” Remolona said. “But we have to manage the liquidity implications of it.”
