{"id":18801,"date":"2024-05-17T03:03:25","date_gmt":"2024-05-17T03:03:25","guid":{"rendered":"https:\/\/energybuzz.ph\/staging\/6915\/bsp-signals-possible-rate-cut-in-aug\/"},"modified":"2024-05-17T03:03:25","modified_gmt":"2024-05-17T03:03:25","slug":"bsp-signals-possible-rate-cut-in-aug","status":"publish","type":"post","link":"https:\/\/energybuzz.ph\/staging\/6915\/bsp-signals-possible-rate-cut-in-aug\/","title":{"rendered":"BSP signals possible rate cut in Aug."},"content":{"rendered":"
\n

By Luisa Maria Jacinta C. <\/b>Jocson, <\/b><\/span>Reporter<\/i><\/p>\n

THE BANGKO ng Pilipinas (BSP) <\/span>stood pat for a <\/span>f<\/span>ifth straight meeting <\/span>but signaled a \u201cless hawkish\u201d tone <\/span>amid lower-than-expected in<\/span>f<\/span>lation.<\/span><\/p>\n

This as the central bank now sees the possibility of monetary easing as early as August.<\/p>\n

The Monetary Board on Thursday left its target reverse repurchase rate unchanged at a 17-year high of 6.5%, as expected by 17 out of 19 analysts in a BusinessWorld<\/i> poll last week.<\/span><\/p>\n

Interest rates on the overnight deposit and <\/span>lending faciliti<\/span>es were left <\/span>unchanged at<\/span> 6% and 7%, respectively.<\/span><\/p>\n

\u201cWe are actually somewhat less hawkish than before, which means we could ease (or) cut rates by the third or fourth quarter this year,\u201d BSP Governor Eli M. Remolona, Jr.<\/span> said at a press brief<\/span>ing.<\/p>\n

Mr. Remolona said that they may reduce rates \u201cpossibly by August of this year.\u201d<\/p>\n

At an event late on Thursday, Mr. Remolona told reporters that the BSP could deliver a 25-basis-point <\/span>(bp) rate cut at its Aug. 15 meeting.\u00a0<\/span><\/p>\n

He said there could be one or two rate cuts within the second semester. \u201cIt\u2019s a range between 25 bps and 50 bps for the rest of the year,\u201d he added.<\/p>\n

Mr. Remolona noted the BSP might start easing ahead of the US Federal Reserve, which he expects to start cutting rates by September.<\/span><\/p>\n

The BSP chief said he is not worried about the potential impact on the peso, noting that there would only be a \u201cbit\u201d of pressure on the cur<\/span>rency if the BSP cuts before the Fed.<\/span><\/p>\n

However, Mr. Remolona said that it still sees the need for \u201csufficiently tight monetary policy settings\u201d until inflation can settle <\/span>f<\/span>irmly within the 2-4% target band.<\/span><\/p>\n

\u201cA restrictive policy stance will also help keep inf<\/span>lation expectations anchored amid a possible buildup in upside risks to future inf<\/span>lation,\u201d he added.<\/p>\n

The BSP lowered its risk-adjusted inf<\/span>lation forecast for this year to 3.8% from 4% previously. However, it raised its risk-adjusted forecast for 2025 to 3.7% from 3.5% previously.<\/p>\n

Meanwhile, the central bank also adjusted its average baseline in<\/span>f<\/span>lation forecast to 3.5% from 3.8% previously. It also hiked its baseline forecast to 3.3% for 2025 from 3.2%.<\/span><\/p>\n

Mr. Remolona noted that their less hawkish stance was due to the \u201cbetter-than-expected\u201d April inflation figure.<\/span><\/p>\n

Headline inflation quickened for a third straight month to 3.8% in April from 3.7% in March. It also marked the fifth straight month that inflation fell within the 2-4% target range.<\/p>\n

For the first four months of 2023, inf<\/span>lation averaged 3.4%.<\/p>\n

However, the BSP chief warned that risks to the inf<\/span>lation outlook \u201ccontinue to lean toward the upside.\u201d<\/p>\n

\u201cPotential price pressures are linked mainly to higher transport charges, food prices, electricity rates, and global oil prices,\u201d Mr. Remolona said.<\/p>\n

BSP Deputy Governor Francisco G. Dakila, Jr. said the BSP still anticipates inflation could potentially overshoot the 2-4% target band from May until July amid positive base ef<\/span>fects.<\/p>\n

\u201cBut even if there were to be some breach of the inf<\/span>lation target band, the expectation is that this will be temporary and there will be a reversion to the target band,\u201d Mr. Dakila added.<\/p>\n

LESS HAWKISH
\n<\/b>Meanwhile, Capital Economics Senior Asia Economist Gareth Leather noted the BSP\u2019s less hawkish tone at Thursday\u2019s meeting compared with its meeting in April. <\/span><\/p>\n

\u201cNot only did the central bank cut its inf<\/span>lation forecast for this year, but clearly hinted that rates would be cut in the third or fourth quarter. This supports our forecast that the easing cycle will begin in August,\u201d he said in a note.<\/p>\n

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said that Mr. Remolona took on a \u201cmore dovish tilt\u201d at Thursday\u2019s meeting.<\/p>\n

\u201cDespite this recent shift in tone from the previously hawkish Remolona, we hold on to our previous expectation that the BSP can only cut policy rates \u2018as soon as the Fed does,\u2019\u201d he said in an e-mail note.<\/span><\/p>\n

Markets were initially anticipating the US Federal Reserve to cut rates as early as June, but this has been pushed back to the fourth quarter amid persistent inf<\/span>lation in the United States.<\/p>\n

Mr. Leather said that Philippine inf<\/span>lation should continue to decelerate in the coming months.<\/p>\n

\u201cHowever, while inflation is likely to remain elevated over the next few months, it should fall in the second half of the year on the back of an increase in the supply of agricultural products, slower economic growth and more benef<\/span>icial base ef<\/span>fects,\u201d he added.<\/p>\n

Pantheon Chief Emerging Asia Economist Miguel Chanco said that inf<\/span>lation could possibly overshoot the target band in May.<\/p>\n

\u201cA minor breach of the upper bound remains likely this month, given the still-unfavorable food price base ef<\/span>fects in play,\u201d he said in a note.<\/p>\n

\u201cBut the May print should be the peak, with a sustained period of disinflation set to take hold from June \u2014 with food-price base e<\/span>f<\/span>fects U-turning to sharply favorable \u2014 opening the door in August for the <\/span>f<\/span>irst of three 25-bp rate cuts we expect this year,\u201d he added.<\/span><\/p>\n

Mr. Leather also sees the BSP cutting rates by 25 bps in August, with further rate cuts late this year.<\/p>\n

For his part, Mr. Mapa expects the f<\/span>irst rate cut to be delivered in October.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

THE BANGKO ng Pilipinas (BSP) stood pat for a fifth straight meeting but signaled a \u201cless hawkish\u201d tone amid lower-than-expected inflation.<\/div>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","footnotes":""},"categories":[1],"tags":[2118,5796,14644,2243,2266,1744,12730],"class_list":["post-18801","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-aug","tag-bsp","tag-bworldonline","tag-cut","tag-possible","tag-rate","tag-signals"],"yoast_head":"\nBSP signals possible rate cut in Aug. - Energy Buzz<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/energybuzz.ph\/bsp-signals-possible-rate-cut-in-aug\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"BSP signals possible rate cut in Aug. - 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