More PH rate cuts coming, says BofA
With inflation expected to continue trending down in the Philippines, the Bangko Sentral ng Pilipinas (BSP) is seen further cutting its policy rate over the next 12 months, putting the country in the same camp as two of its peers in the Association of Southeast Asian Nations.
This is according to the Bank of America (BofA), which said in a Nov. 15 report that the Philippines—along with Indonesia and Thailand—has space to continue easing monetary policy or lowering rates.
“Low inflation gives ample space for Indonesia and Philippines to reduce policy rates, but they also will keep a close eye on their currencies and financing conditions to gauge the triggers for cuts,” said the BofA report.
It noted that the Philippines was coming off over two years of “relentless tightening” that brought the policy rate to an over 17-year high of 6.5 percent to contain stubborn inflation.
100 basis points
For the BSP in particular, the BofA said they see it making a 25-basis-point (bp) cut every quarter, starting the fourth quarter of this year until the third quarter of 2025, for a cumulative cut of 100 bps over 12 months.
This projection will bring the BSP’s policy rate to 5.75 percent by the end of 2024, lower than the earlier forecast of 6 percent.
But for 2025, BofA retained the earlier projection that the key rate will go down to 5 percent.
Meanwhile, the report said that it sees Singapore, Vietnam and Malaysia being in the “stable monetary policy camp” for now, meaning rates should stay where they are for some time.
Inflation
“The primary source of divergence is the inflation and output gap path over the next twelve months, partly contingent on the extent of real rates and its divergence from their historical neutral levels,” said the BofA report.
“We see scope for deeper cuts from [Bangko Sentral ng Pilipinas] and [Bank Indonesia], while [Bank of Thailand] is a reluctant mover on rates,” it added.
In mid-October, the BSP delivered a quarter-point cut to 6 percent effective Oct. 17, with Governor Eli Remolona Jr. dropping clear hints of additional easing moves this year and in 2025.
