LAPU LAPU CITY. — The central bank yesterday said the possibilities are high key rates will be reduced by December or by the first few months of next year.
“We’re still in the easing cycle. Either we cut in December or we cut in the next meeting, but slowly,” said Eli Remolona, Bangko Sentral ng Pilipinas (BSP) governor, stressing that the cuts will be around 25 basis points (bps).
“(There’s also a) possibility of a pause (for the next meeting). It depends on the available data,” Remolona said on the sidelines of the 2024 BSP-IMF Systemic Risk Dialogue here.
The Monetary Board last month reduced the key rates of the BSP to 6 percent.
The central bank’s rates on overnight deposit and lending facilities were also reduced to 5.5 percent and 6.5 percent, respectively.
October’s tweak was the second consecutive 25 bps cut by the country’s policymaking body. The next, and the last meeting for this year, will be on December 19.
Remolona hinted at the likelihood of more cuts totalling 100 bps. During the last meeting, he said they are looking at a neutral rate of 5 percent.
“Not exact. It could be more, it could be less (than 100 bps) but that’s in the ballpark,” he said.
The Monetary Board’s decision last month was based on the assessment that price pressures “remain manageable,” Remolona said.
In particular, Remolona noted the easing of the risk-adjusted inflation forecast for the year to 3.1 percent from 3.3 percent in the previous meeting.
Central banks use monetary policy to control overall money supply and achieve economic growth.
A tighter policy increases interest rates and limits the outstanding money supply to slow growth and decrease inflation. An easing cycle, meanwhile, grows economic activity by lowering interest rates and makes consumer spending and borrowing more attractive.
“The next number to expect is the November inflation number. We expect it will still be within the target band,” Remolona said.
Meanwhile, the peso “is still doing okay,” Remolona added.
“It is still below P59 to a dollar. We don’t worry so much about whether the peso depreciates or appreciates. We worry about the pass-through effect. For now, we still think it’s okay,” he said.
“We intervene a little bit. We don’t have a target (exchange rate). We’ve been in and out in small amounts. It’s not that important to us. We leave it to the guys in the financial markets area, but if it depreciates very sharply, then we walk. If it isn’t sharp, it doesn’t become inflationary,” Remolona said.
