Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona yesterday reiterated that the benchmark rate could be cut ahead of the Federal Reserve, keeping pressure on the peso against the dollar amid expectations US rates will stay higher-for-longer.
Remolona said the BSP is ready to take action when the peso is under stress, but added the central bank does not intervene in the foreign exchange market on a daily basis.
“We intervene to express our own view where the peso should be going,” Remolona said.
The peso has weakened past 58 per dollar to its lowest levels in 19 months. So far in 2024, the peso has fallen 5.8 percent against the dollar.
The central bank chief said the benchmark policy rate – currently sitting at 17-year high of 6.50 percent – could be cut before the Fed starts its easing cycle, repeating previous comments as policymakers gain more confidence about reining in inflation pressure.
Remolona said the BSP is already less hawkish than before as inflation could settle within its 2 percent to 4 percent comfort range sometime this year after staying above the top end of that target for two consecutive years.
The BSP, which kept its benchmark rate steady at its last five meetings, has said it was looking to cut rates by 25 basis points as early as August and by another 25 basis points in the fourth quarter.
The BSP’s stance and market pricing suggesting the Fed’s first cut could come as late as December have undermined the peso.
However, Remolona played down comments made by Finance Secretary Ralph Recto last month on the possibility of 150 basis points of rate cuts over the next two years, saying that it might be “too aggressive” given the current growth path.
“For that to happen, I think there should be a risk of a hard landing,” he added.
The Philippine economy grew 5.7 percent in the first quarter, lagging expectations but picking up the pace slightly from the last three months of 2023.
