BSP poised to cut rates by at least 50 bps this year – ING economist

The Bangko Sentral ng Pilipinas (BSP) will likely cut its benchmark rates by around 50 to 75 basis points this year starting October, in step with the expected move of the US Federal Reserve.

Rob Carnell, ING Bank regional head of research for Asia-Pacific, said this was a possible scenario, noting as well that inflation here is not as bad as it looks.

“I think we have 100 basis points coming from the Fed. We’ve got 50 in September: 25, 25. We’re not going to get as much coming from the BSP over that period,” Carnell told reporters on the sidelines of the bank’s economic briefing on Monday.

READ: No BSP rate cut just yet, economists say

Inflation hit 4.4 percent in July, according to preliminary data from the Philippine Statistics Authority, falling within the 4 percent to 4.8 percent forecast of the BSP for the month.

The July posting was the highest rate in nine months and faster than the 3.7 percent in June.

Carnell said it would be better for the BSP to start cutting about a month after the Fed eases its own rates.

“I just think the optics will look a little bit better in a month’s time and there’ll also be that sort of safety in numbers at that stage because we will have the Fed easing by then,” he said.

A recent Inquirer poll of 10 economists showed that the policy rate will likely be unchanged for the seventh straight meeting, which will happen this week on Aug 15.

Six out of 10 economists that were surveyed believed that the Monetary Board would keep the benchmark rate untouched at an over 17-year high of 6.5 percent at the upcoming meeting.

The majority or six economists who are projecting rates to stay on hold this month expect the BSP to only start easing next month, with a 25-basis point cut likely on the horizon. INQ