THE Monetary Board of the Bangko Sentral ng Pilipinas (BSP) delivered another 25 basis points (bps) rate cut during its last meeting for this year.
The BSP has so far reduced policy rates by a total of 75 basis points this year.
The latest cut brings the central bank’s target reverse repurchase rate to 5.75 percent.
The interest rates on the overnight deposit and lending facilities were also adjusted to 5.25 percent and 6.25 percent, respectively.
“Inflation is projected to stay within the target range over the policy horizon,” BSP Governor Eli Remolona Jr. said in a briefing at the BSP office in Manila.
The BSP’s risk-adjusted inflation forecast for 2024 is at 3.2 percent.
For 2025, the risk-adjusted forecast slightly went up to 3.4 percent from 3.3 percent.
Remolona said the risk-adjusted forecast for 2026, meanwhile, is at 3.7 percent.
“The balance of risks to the inflation outlook continues to lean to the upside due largely to potential upward adjustments in transport fares and electricity rates,” he said.
The impact of lower import tariffs on rice remains the main downside risk to inflation.
Remolona said the domestic demand will likely remain firm but subdued.
Private domestic spending is expected to be supported by easing inflation and improving labor market conditions.
“However, downside risks in the external environment could materialize and temper economic activity and market sentiment,” he said.
“On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy.”
Remolona said that while the BSP will continue to maintain an easing posture, the possible cut will be less than 100 bps.
“At this stage, given our forecast and given the data, [cutting] 100 basis points (next year) may be a bit much,” he said.
“I think we will maintain an easing posture, but not to the extent of cutting by 100 bps. We will have to see what the data said.”
Remolona assured that the central bank will continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors.
“Looking ahead, the Monetary Board will maintain a measured approach to monetary policy easing to ensure price stability conducive to sustainable economic growth and employment,” he said. (PNA)
