{"id":19498,"date":"2024-06-28T03:07:43","date_gmt":"2024-06-28T03:07:43","guid":{"rendered":"https:\/\/energybuzz.ph\/staging\/6915\/bsp-stands-pat-signals-rate-cut-in-aug\/"},"modified":"2024-06-28T03:07:43","modified_gmt":"2024-06-28T03:07:43","slug":"bsp-stands-pat-signals-rate-cut-in-aug","status":"publish","type":"post","link":"https:\/\/energybuzz.ph\/staging\/6915\/bsp-stands-pat-signals-rate-cut-in-aug\/","title":{"rendered":"BSP stands pat, signals rate cut in Aug."},"content":{"rendered":"
\n

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

THE BANGKO SENTRAL ng <\/span>Pilipinas (BSP) kept interest rates<\/span> steady for a sixth straight meeting on Thursday but signaled that a rate cut at its next meeting in August is \u201csomewhat more likely than before,\u201d with up to 50 basis points (bps) in easing likely this year.<\/p>\n

The Monetary Board on Thursday left its target reverse repurchase rate unchanged at 6.5%, the highest in over 17 years. This was in line with the expectations of all 15 analysts in a BusinessWorld <\/i>poll last week.<\/span><\/p>\n

Interest rates on the overnight deposit and lending facilities were also maintained at 6% and 7%, respectively.<\/p>\n

Mr. Remolona said he expects inflation to further ease in the second semester with the implementation of lower tariffs on rice.\u00a0<\/span><\/p>\n

\u201cThe balance of risks to the inflation outlook has shifted to the downside for 2024 and 2025 due largely to the impact of lower import tariffs on rice under Executive Order (EO) No. 62,\u201d he said at a press brief<\/span>ing.<\/p>\n

\u201cIf sustained, an improvement in the inflation outlook would allow more scope to consider a less restrictive monetary policy stance.\u201d<\/span><\/p>\n

President Ferdinand R. Marcos, Jr.<\/span> earlier this month signed EO 62 which slashed tariffs on rice imports to 15% until 2028 to tame rice prices.<\/p>\n

Mr. Remolona said that inf<\/span>lation is \u201cmoving closer\u201d to the midpoint of its 2-4% target, adding that expectations are still well-anchored.<\/p>\n

The central bank slashed its risk-adjusted inflation forecast for this year to 3.1% from 3.8% previously. It also cut its risk-adjusted estimate for 2025 to 3.1% from 3.7% earlier.<\/p>\n

Meanwhile, it lowered its average baseline inflation forecast for 2024 and 2025 to 3.3% and 3.1%, respectively, from 3.5% and 3.3%, previously.<\/span><\/p>\n

\u201cNonetheless, higher prices of food items other than rice, transport charges, and electricity rates continue to pose upside risks to inflation,\u201d Mr. Remolona said. \u201cMeanwhile, prospects for domestic output growth remain in line with medium-term trends amid favorable labor market conditions and strong net exports.\u201d<\/span><\/p>\n

He said the Monetary Board is \u201con track\u201d to cut rates when it next meets on Aug. 15. This will likely be ahead of the US Federal Reserve which earlier signaled it may start easing in December.<\/p>\n

\u201cLast time I said we\u2019re still hawkish, but less so. We\u2019re basically in the same position now. Somewhat more dovish than before,\u201d Mr. Remolona said.<\/p>\n

The BSP could cut rates by 25 basis points (bps) in the third quarter and by another 25 bps in the fourth quarter, he added.<\/p>\n

The Monetary Board\u2019s Aug. 15 review is its only meeting in the third quarter. Meanwhile, its last two reviews for the year will be held in the fourth quarter and are scheduled on Oct. 17 and Dec. 19.<\/p>\n

TOO EARLY TO CUT?
\n<\/b>Analysts noted the more dovish signals from the BSP compared with its previous meetings.<\/p>\n

\u201cTellingly, the read-out this time didn\u2019t contain any language about how policy needs to be \u2018sufficiently tight,\u2019 saying instead that an improvement in the inflation outlook going forward would allow for some scope for policy to be \u2018less restrictive,\u2019\u201d Pantheon Chief Emerging Asia Economist Miguel Chanco said in an e-mail note.<\/span><\/p>\n

HSBC economist for ASEAN (Association of Southeast Asian Nations) Aris D. Dacanay in a note said that the BSP\u2019s tone is \u201cperhaps slightly more dovish, not closing the possibility of it cutting ahead of the Fed.\u201d<\/p>\n

\u201cWe even think the BSP was even more confident than last time, ref<\/span>lecting the fact that monetary policy in the Philippines may be becoming more independent from the Fed, even if partially,\u201d he added.<\/p>\n

However, Mr. Dacanay said that August may still be too soon to loosen policy reins.<\/p>\n

\u201cWe do not think inflation will be soft enough by the August meeting with the rice tariff rate cut needing time to work its way in reducing prices,\u201d Mr. Dacanay said.<\/span><\/p>\n

ANZ Research said in a report that it may be too early to cut rates as inf<\/span>lation is still hovering near the upper bound of the 2-4% target as \u201cupside risks from food prices continue to linger.\u201d<\/p>\n

ANZ said it expects the central bank to start cutting rates in early 2025, \u201cif inflation consistently moves towards the midpoint of the official target range in the first quarter of 2024.\u201d<\/p>\n

Meanwhile, Mr. Chanco still expects that the BSP will cut by 25 bps in August, in line with the BSP\u2019s outlook.<\/p>\n

\u201cOur core view still is that the Board will start a gradual normalization of policy in August with a 25-bp rate cut, following this on with similar-sized reductions in the October and December meetings,\u201d he added.<\/p>\n

PESO INTERVENTION
\n<\/b>Meanwhile, Mr. Remolona said the central bank is \u201coccasionally\u201d intervening in the peso.<\/p>\n

\u201cWe\u2019ve been watching the peso. We don\u2019t want it to depreciate too sharply. We occasionally intervene. I think today (Thursday) we did intervene. We don\u2019t want it to depreciate too sharply,\u201d Mr. Remolona said.<\/p>\n

The peso closed at P58.75 per dollar on Thursday, strengthening by 11 centavos from its P58.86 finish on Wednesday. Its close on Wednesday was its weakest finish in over 20 months.<\/p>\n

However, Mr. Remolona said that the peso\u2019s effect on inflation is \u201cnot very large.\u201d<\/p>\n

\u201cWe think the pass-through, which is what we call the effect of depreciation on inflation, is estimated at 0.36% per 1% depreciation (of the) peso. Since the beginning of the year, the peso has depreciated by 5.7%. So, 5.7% against 0.36%, that adds up to a total about 0.2% in inflation.\u201d<\/p>\n

Mr. Remolona said that the central bank is active in intervening when it \u201csenses stress in the market.\u201d<\/span><\/p>\n

\u201cBut mostly we come in to slow down the tendency of the peso to depreciate sharply. We don\u2019t come in every day,\u201d he added.<\/p>\n

The Development Budget Coordination Committee on Thursday raised its foreign exchange rate assumption to a range of P56-P58 this year, a higher band than its P55-P57 range previously.<\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

THE BANGKO SENTRAL ng Pilipinas (BSP) kept interest rates steady for a sixth straight meeting on Thursday but signaled that a rate cut at its next meeting in August is \u201csomewhat more likely than before,\u201d with up to 50 basis points (bps) in easing likely this year.<\/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":[2118,5796,14644,2243,4453,1744,12730,4043],"class_list":["post-19498","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-aug","tag-bsp","tag-bworldonline","tag-cut","tag-pat","tag-rate","tag-signals","tag-stands"],"yoast_head":"\nBSP stands pat, signals 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-stands-pat-signals-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 stands pat, signals rate cut in Aug. - 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