BSP poised to deliver final 25-bp rate cut in ʼ24

INQUIRER FILE PHOTO

The Bangko Sentral ng Pilipinas (BSP) is expected to deliver its final rate cut this year of 25 basis points (bp), despite the slightly faster inflation rate of 2.5 percent in November as price pressures remain manageable.

Four banking institutions polled by the Inquirer predicted that the Monetary Board, the highest policymaking body of the BSP, will continue easing and slash the benchmark rate for the third time this year once they convene for the last time this year on Dec. 19.

Should the projection materialize, the policy rate will then be reduced to 5.75 percent from 6 percent, which was the lowest since February 2023.

Benign inflation

Emilio Neri Jr., senior vice president and lead economist at Bank of the Philippine Islands (BPI), said that while a pause or skip remains possible, recent economic data and external developments have aligned in favor of monetary easing.

“First, the inflation outlook for 2025 supports the case for a rate cut. Despite consumer prices rising at a faster pace in November, inflation remains well within the target,” Neri said.

“A slew of typhoons caused vegetable prices to soar, but falling prices of key items like rice have tempered overall price increases,” he added.

Neri also said that recent economic activity data have fallen short of government and analyst expectations, and that pressure on government officials to deliver a rate cut continues to build.

Meanwhile, China Banking Corp. cited that recent inflation prints have been at the lower end of the BSP’s 2 percent to 4 percent target range, estimating that inflation will remain firmly within target going forward.

“Furthermore, the Fed is also widely expected to lower its own policy rate by 25 bps next week, which should give the BSP more room to continue easing monetary policy,” Chinabank added.

Persistent risks

Additionally, Chinabank said the BSP would likely continue to signal a cautious approach to rate cuts, citing persistent risks and global uncertainties.

Metrobank likewise said that the rate cut would happen again amid “benign consumer prices.”

Its analysis penned by Maria Kaila Balite, the bank’s research officer, and research analyst Ezra Vidar, cited the start of a pickup in consumer and investment spending in the July to September period following the start of the BSP’s monetary easing cycle.

“Despite the improvements, growth is projected to still settle below the official government target of 6 percent to 6.5 percent for 2024,” the two said.

“Given this, and with inflation likely to remain within target, the BSP has room to continue its monetary easing to further stimulate consumption and investment expenditure and drive higher growth next year,” they added.

A forecast by Deepali Bhargava, ING Bank Philippines head of research for Asia-Pacific, also pointed to the same likely rate cut from the BSP this week. INQ