Another rate cut possible in early 2025 – Remolona

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona. FILE PHOTO

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is open to delivering a fourth rate cut at its first meeting in 2025, Governor Eli Remolona Jr. said, adding that any additional easing would mostly depend on local developments than the pace of rate reductions in advanced economies like the United States.

“We will be open to a cut given the data, of course,” Remolona said in an interview with Bloomberg on Friday.

The BSP has yet to release the schedule of its rate-setting meetings for next year, but the central bank chief said the Monetary Board (MB) would convene six times in 2025 to decide on monetary policy.

“We’re leaning toward additional cuts in 2025. That’s our trajectory,” Remolona said, adding that current monetary policy settings are still “somewhat tight.”

The BSP last Thursday capped 2024 with a third consecutive quarter-point reduction to the policy interest rate, with Remolona keeping his intention to take “baby steps” when it comes to easing amid persistent price pressures.

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Gradual

The latest move put the key rate that banks typically use as a guide when pricing loans to 5.75 percent. At the same time, the decision brought the cumulative rate reductions this year to 75 basis points (bps), following two quarter-point cuts each at the August and October meetings of the MB. By lowering borrowing costs, the BSP wants to spur consumption—a major growth driver—and investments.

The Philippine central bank stayed on easing mode even while neighbors Thailand and Indonesia stood pat this week in the face of a hawkish rate cut by the Fed, which signaled a much slower trajectory of monetary policy loosening in 2025 because of stubbornly high inflation stateside.

What convinced the BSP to deliver another cut was a mild 2.5-percent uptick in inflation in November, and economic growth that significantly slowed in the third quarter.

Moving forward, Remolona said “we’re still on the same trajectory as before” despite expectations of a shallower Fed easing, which may continue powering up the dollar and weigh on the peso that had fallen to the record-low 59:$1 level thrice this year.

“We ourselves are neither more dovish, nor less dovish,” the BSP boss said. “We don’t directly look at the policy rate that the FOMC (Federal Open Market Committee) sets.”

Separately, the International Monetary Fund (IMF) said in a statement following the conclusion of its 2024 Article IV Consultation with the Philippines early this month that a “continued gradual reduction in the policy rate is appropriate.”

“A data‑dependent approach and careful communication will be important to manage expectations amid uncertainty and more frequent supply-side shocks,” the IMF said.