MARCOS DIRECTS AGENCIES: CUSHION IMPACT OF US TRADE POLICY ON PH INFLATION
Inflation in March may have slowed further from previous months to settle within the central bank’s forecast range of between 1.7 percent and 2.5 percent, but heeding the economists’ warnings about a major risk still looming from the US tariff policies, President Ferdinand Marcos Jr. instructed concerned government agencies to put measures in place to cushion the impact of such headwinds on the Philippine economy.
The Bangko Sentral ng Pilipinas (BSP) said on Monday lower prices of rice, fruits and vegetables in March, “owing to favorable domestic supply conditions, as well as the peso appreciation” may have offset the upward price pressures on services such as electricity rates and other food items such as fish and meat.
The BSP said this could have led to the easing of the consumer price index, which the Philippine Statistics Authority (PSA) reported at 2.1 percent in February and 2.9 percent in January.
Full inflation data for March will be released by the PSA on Friday, April 4.
US tariff effect
From the presidential palace, Communications Undersecretary Claire Castro said on Monday President Ferdinand Marcos Jr. has directed government agencies to closely monitor US President Donald Trump’s trade policies — with tariffs for imports from trade partner-countries expected to be announced on April 2 — and ensure no drastic or heavy impact hits the Philippine economy, especially the prices of commodities.
“(The President) is closely monitoring the developments in the United States as they are expected to impact the country’s inflation,” Castro said.
“Maaari pong maapektuhan ang inflation rate … patungkol po diyan sa nangyayari po sa US. So, tingnan na lang po natin at gagawa naman po ng paraan. (The inflation rate could be affected by the things that are happening in the US, so let’s see what they are, and so we could find solutions),” she said.
“Ang narinig ko na sinabi po ni Pangulo na maibsan po agad kung ano po ang magiging impact nito sa darating na taon (What I heard from the President was to immediately alleviate any severe impact that could have on inflation in the year ahead),” she added.
Economist/analyst warnings
Economists and analysts have been expecting inflation to continue easing in the months ahead and predicting that the BSP would cut its key interest rates by 25 basis points this April and another 25 basis points in the second half of the year. Before the weekend, the BSP released the results of its first-quarter Business Expectations Survey, showing that business sentiment toward the second quarter remained upbeat on the back of positive factors such as the midterm elections in May and low interest rates.
However, the outlook is not all rosy, analysts said, given the expected ripple effects of US President Donald Trump’s tariff policies on all its major trade partners, especially those with huge trade balance advantage over the US.
RCBC lead economist Michael Ricafort has warned that a major risk looms from Trump’s tariff policy and other protectionist measures that could lead to weaker global trade.
Measured approach
In its statement yesterday, the BSP said the policy-setting Monetary Board “will continue to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment.”
The next Monetary Board meeting is set for April 10.
Citing economic uncertainty over global trade policies, the Monetary Board in its February meeting decided to freeze its key rates — the BSP Target Reverse Repurchase (RRP) Rate at 5.75 percent. The interest rates on overnight deposit and lending facilities also remained unchanged at 5.25 percent and 6.25 percent, respectively.
BSP governor Eli Remolona in his latest interview said a rate cut is “on the table” for the April 10 meeting, emphasizing the need to stay with “baby steps,” which means 25 basis points cut at a time.
Central banks use interest rates to manage inflation—raising rates to cool down the economy and lower inflation when it’s high and reducing rates to stimulate growth when inflation is low.
With inflation seen slowing down in March, analysts said a rate cut is also likely on April 10.
Nicholas Mapa, Metrobank chief economist, said in a Viber message “another month of subdued inflation gives the BSP more than enough reason to finally pull the trigger on a rate cut in April.”
Ricafort of RCBC said in a Viber message relatively benign inflation levels support future local policy rate cuts.
BPI chief economist Jun Neri expects the first 25 bps rate cut to be made when the Monetary Board meets on April 10.
