Two more rate cuts this year possible – BSP

It’s possible for the Bangko Sentral ng Pilipinas (BSP) to cut interest rates twice more at the last couple of meetings of the Monetary Board (MB) this year, Governor Eli Remolona Jr. said, as he also sees chances of lower inflation this month.

Speaking to reporters on the sidelines of a forum hosted by the Asian Development Bank (ADB) on Wednesday, Remolona said that, “in theory,” the BSP can slash the benchmark rate by a quarter point at each of the last two meetings of the MB for 2024.

But the central bank chief ruled out the possibility of a jumbo 50-basis point (bp) cut, arguing that such a move might indicate that there are “risks of a hard landing.” The remaining rate-setting meetings of the BSP for this year are scheduled in October and December.

“In normal times, that’s what central banks do, right? 25, 25, 25,” Remolona said.

At its Aug. 15 meeting, the policymaking MB slashed the benchmark rate by 25 bps to 6.25 percent. That move marked what Remolona had called a “calibrated” easing cycle.

Weeks after that decision, government data showed inflation slowed to 3.3 percent in August, easing back to within the 2- to 4-percent target range of the BSP. State statisticians had said rice price inflation may fall to single-digit level in September due to reduced tariffs on the staple grain, which can help tame the overall growth of prices in the coming months.

Early easing

The slower inflation last month, in turn, vindicated the central bank’s decision to trim rates early and ahead of the US Federal Reserve, which delivered a jumbo 50-bp cut last week amid signs of a slowing American jobs market.

If the latest signal from the BSP governor happens, cumulative cuts this year would amount to 75 bps, which would bring the key rate to 5.75 percent by the end of 2024.

In the same interview with reporters, Remolona said it’s “possible” for inflation to register a milder reading in September.

“The last number that we get, the September [inflation] number that will be released next week. That feeds into our projections,” the BSP chief said. “So what we care about is the projection for one year from now because monetary policy works with a lag.”