BSP delivers quarter-point cut; more to come
Further rate cuts are on the table of the Bangko Sentral ng Pilipinas (BSP), which reduced its policy rate by another quarter-point on Thursday, a move that can boost a slowing economy that’s facing headwinds from trade uncertainties and geopolitical risks.
In its latest meeting, the powerful Monetary Board trimmed the policy rate that banks use as a guide when pricing loans to 5.25 percent.
All 15 economists polled by the Inquirer last week saw the decision coming.
The key rate has now been lowered by a total of 1.25 percentage points since the beginning of the easing cycle last year.
Speaking to reporters, BSP Governor Eli Remolona Jr. said another 25-basis point reduction could happen in any of the last three meetings of the central bank this year.
But such an action, he said, would remain dependent on the data.
For now, the central bank chief said the numbers were supportive of “a more accommodative monetary policy stance”. Data showed inflation eased to 1.3 percent in May from 1.4 percent in the preceding month, undershooting the 2 to 4 percent target band of the BSP.
“If things remain on track, we’ll probably cut once more. Depending on the data, twice more. Depending on the data, we may not cut at all. For now, one more,” Remolona said.
More cuts
But there were some developments that would have delayed Thursday’s rate cut.
The peso is having one of its worst weeks after the US Federal Reserve’s decision to hold rates powered up the dollar.
Meanwhile, the BSP itself said the ongoing war in the Middle East and uncertainty over US trade policy “require closer monitoring”.
While inflation remains the “number one” priority of the central bank, Remolona said the slowing economy could use some help by making domestic financial conditions less restrictive.
“Like the rest of the world, we’re looking at slower growth. But unlike the rest of the world, we’re also looking at lower inflation. The rest of the world is looking at higher inflation,” he said.
“The lower inflation rates that we’re looking at give us more degrees of freedom,” he added.
Miguel Chanco, economist at Pantheon Macroeconomics, said two more quarter-point cuts were likely on deck this year.
“The upsurge in global oil prices over the past week or so amid the escalation of hostilities between Israel and Iran remains only a risk, for now, to our below-consensus inflation and policy rate forecasts,” Chanco said in a commentary.
