Bangkok Sentral NG Pilipinas (BSP) is expected to drop 25 basis points (BPS) this week due to price pressure and slowdown in economic growth.
one BusinessWorld Polls conducted last week showed that 13 of 16 analysts hoped that the Monetary Commission would lower the target reverse buyback rate by 25 basis points at the June 19 policy meeting.
If implemented, this will increase the benchmark rate from the current 5.5% to 5.25%.
Only one analyst, Ser Percival K. Peña-Reyes, director of the Ateneo Economic Research and Development Center, is expected to keep interest rates unchanged.
Analysts say the downward trend in the first quarter and the growth that exceeded expectations have allowed the central bank’s room to continue its slow cycle.
“Over expected trajectory of inflation in the Philippines, a strong local currency, high real interest rates and uncertainty about global growth have exacerbated our view that monetary policy mitigation is not over yet,” the Bank of Britain said.
HSBC Bank economist at HSBC Aris D. Dacanay said he had previously predicted a suspension in June “will keep in mind the favourite that the Fed took a moment,” but now expects a 25 bp reduction on Thursday.
“Due to low inflation rates over the past two months and slow growth in Q1 2025, we expect BSP to lower its policy rate by 25 basis points to 5.25% (June 19),” he said.
Inflation was 1.3% at a five-year low in May as utility costs rose at a slower pace. This brings the five-month average to 1.9%, slightly below the 2-4% target band of BSP.
“Easy inflation provides relief for consumers and businesses, from 2022 to the first half of last year, with prices rising,” said Sarah Tan, an analytical economist at Moody’s.
ANZ Research said the outlook for inflation “is still benign with lower global commodity prices.”
“Given that retail rice prices are not as cheap as global rice prices, food and overall inflation remain for the rest of 2025,” Dakani said.
In May, rice inflation continued to decline, from 10.9% drop in April to 12.8%.
Metropolitan Bank & Trust Co. chief economist Nicholas Antonio T. Mapa said he wants inflation to be the target Consistent”, this year, 2025 and 2026.
Central banks cut their risk-adjusted inflation forecasts to 2.3% in 2025, from the previous 3.5%; in 2026, from the previous 3.7%. Now, it also expects inflation to be 3.2% by 2027.
Growth below target
Angelo B. Taningco, chief economist at Security Bank, said Targeting GDP below target The first quarter and the strong peso are some of the factors that the BSP will consider this week’s decision.
Miguel Chanco, chief emerging Asian economist at Pantheon macroeconomics, said he expects tax rates to be lowered this week, and “GDP growth is still working to design for material pickup.”
The Philippines economy grew by 5.4% annually in the first quarter, slightly higher than the 5.3% growth rate in the fourth quarter of 2024, but slower than the 5.9% rate in the same quarter last year.
This is also lower than the government’s 6-8% growth target for the band that year.
“We believe this slowdown increases pressure on BSP to accelerate its relaxation cycle. This is because lowering policy rates can help cause the country’s services exports (or exports in general) by increasing the competitiveness of PESO relative to other currencies,” Dakani said.
Oikonomia Advisory & Research, Inc. Reinielle Matt M. Erece economists say the Peso’s recent strength provides some leeway for BSPs to lower the previous Fed rates.
The Philippine Bankers Association showed that local departments completed 32.5 Centavos at a price of P56.21 per dollar on Friday, from P55.885 on Wednesday.
This is the weakest result since the Peso closed P56.42 on more than a month or April 28. This is also the first time that local currency has violated the P56 USD since it ended with P56.145 on April 29.
So far, the peso has been obtained from P57.845 closed on December 27, 2024 from P1.635.
Ms Tan said the recent stability of the peso will “provide additional impetus for the decision-making process.”
“In a complex external environment, ongoing monetary easing will play a crucial role in supporting the domestic economy. Although negotiations with the United States to reduce mutual tariffs are underway, the results are still uncertain.”
The further reduction will also help protect the country’s economy from global growth uncertainty and tariff-related risks, Maybank Investment Banking Group Research said.
prospect
Analysts expect BSP to further reduce borrowing costs this year as inflation remains under control.
“Given the manageable inflation outlook, we believe that BSP will reduce the terminal to 5% by policy rates from 2025 (third quarter) to 2025,” ANZ Research said.
Mr. Erec of Oikonomia said BSP could reduce interest rates by 50-75 barrels in 25 bp increments this year to avoid extreme forex fluctuation.
“Cutting tax rates, which exceeds its impact on borrowing costs, also signals the market that central banks are confident that inflation is well controlled,” he said.
Emilio S. Neri, chief economist at the Bank of the Philippines Islands. Say that BSPs can hold loans Costs stabilized at the August 28 meeting.
“To avoid the need for a sudden policy reversal, BSP could keep policy rates above 5% by the end of this year until well above 4% between 2026 and 2026. Risks include soaring global oil prices, uncertainty in global tariff policy, stagnation in the United States, growing local wages Inflation expectations. ” he said.
BSP Governor Eli M. Remolona, Jr. The Monetary Commission has previously said that the Monetary Commission can lower interest rates in 25 basis points increments for the rest of the year. – AMC SY
