Rice import policy in spotlight as BSP weighs rate path
The Bangko Sentral ng Pilipinas (BSP) is expected to tread carefully as it approaches the end of its rate-cutting cycle, especially amid fresh policy debates that could cloud the inflation outlook—most notably a proposal to stretch the ban on rice imports.
Finance Secretary Ralph Recto said economic officials would meet to discuss the proposal’s possible impact on rice prices and inflation expectations.
Recall that Agriculture Secretary Francisco Tiu Laurel Jr. signaled he may advise President Marcos to extend the ban by 15 to 30 days, pointing to firmer “palay” prices since the restrictions took effect.
The present 60-day moratorium, which began on Sept. 1, was timed to shelter growers during the peak of the main harvest season.
“Lower rice prices and lower inflation rates may allow us to further reduce interest rates that will benefit 115 million consumers, including rice farmers and investors,” said Recto, who is also a member of the BSP’s Monetary Board.
Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said that while supporting farmers with a prolonged moratorium could bolster farmgate prices, the move risks nudging retail rice costs higher.
“While inflation remains low, any supply-driven uptick—especially in a staple like rice—could complicate the BSP’s easing path,” Asuncion said.
“The central bank will likely stay cautious, prioritizing price stability over aggressive rate cuts because the risk is there,” he added.
Healthy local supply
Nicholas Mapa, chief economist at Metrobank, believes that an extension of the temporary import ban would unlikely upset the inflation outlook, citing healthy local supply.
“Domestic rice supply remains at elevated levels as of August at 2.3 million metric tons, and with the harvest season we can expect a stable supply of grains,” Mapa said. “Ample supply should translate to stable prices of rice even if the ban is extended.”
The BSP signaled it was near the end of its interest rate-cutting run—a campaign that reduced the benchmark rate that banks use as a guide when pricing loans to a “Goldilocks” level of 5 percent.
Reaching the neutral level took a total of 1.5 percentage points cut to the policy rate during the current easing cycle. Governor Eli Remolona Jr. had said the central bank could keep its policy rate unchanged through the end of the year if inflation remains subdued and demand holds up.
Still, Remolona left the door open to further easing, saying the Monetary Board could consider another reduction at its October or December meetings if demand falters amid headwinds at home and abroad.
The consumer price index climbed 1.5 percent in August from a year earlier, quickening from July’s 0.9 percent increase.
That was the steepest gain since March’s 1.8 percent after costlier vegetables offset the faster decline in rice prices, which fell to a record 17 percent drop. Nevertheless, inflation remained below the 2 to 4 percent target range of the BSP.
Junjie Huang, economist at Deutsche Bank, said real interest rates—or the actual cost of borrowing after factoring in inflation—remains high despite the recent cuts, suggesting that there’s still space for more easing.
“We maintain our call for another 25-basis point rate cut in its December meeting, especially as the fiscal impulse could taper alongside the government’s fiscal consolidation in the year ahead, while private sector sentiment remains subdued,” Huang added.
