go through Luisa Maria Jacinta C. Josen, Senior Reporter
Bangladesh Sentral Ng Pilipinas (BSP) may reduce tax rates later this monthfIsir said on Monday.
BSP Governor Eli M. Remolona, Jr. It said that at the next meeting on August 28, the tax reduction was “very likely”.
Since its slow cycle began last August, central banks have so far reduced borrowing costs by 125 basis points (BP).
If BSP lowers the policy rate this month, it will mark its third consecutive rate reduction. In June, the Monetary Commission cut 25 basis points, raising the benchmark rate to 5.25%.
Mr Remolona said they expect to cut it twice this year.
He told bystanders of the Philippine Economic Economics Forum: “I think two are more likely than one.”
However, he pointed out that the possibility of cutting the three taxes is “unlikely”.
He said in a mixed English and Filipino: “That would be beyond the rate we think of ‘Goldilocks’, the output gap. Our output gap is already small.”
Mr Remolona had earlier said it would also be impossible to guarantee a third cut this year to require “very unusual things”, such as a sharp slowdown in growth.
The economy grew by 5.5% in the second quarter, supported by a rebound in agricultural production and faster household consumption.
In the first half of the year, the average growth rate of GDP was 5.4%, slower than 6.2% a year ago. The government’s target this year is 5.5-6.5%.
Following the August 28 meeting, the BSP will hold two more policy meetings by the end of 2025.
Meanwhile, Mr Remorona said inflation this year is still well resolved.
“In terms of inflation, we think we will reach 2% in 2025,” he said.
“This is much better than other emerging markets, they will reach 3.1%, while other advanced economies will reach 3.3%. So (the inflation rate in the Philippines will be lower than both developed economies and emerging markets.”
The title inflation rate in July dropped sharply to a nearly six-year low of 0.9%, marking the fifth straight month of inflation falling below the central bank’s target range of 2-4%.
Inflation averaged 1.7% in the first seven months of the year.
“If you look at our forecasts, we’ll see that our inflation targets are still there. I think we still have work to do,” Remorona said.
BSP is expected to reach an average of 3.3% in 2027, with core inflation of 3.1%.
He added: “Both are within the scope of our goal. We hope we can achieve that. I think it will help stabilize the economy, support investment, and our banks support loans.”
Peso performance
Meanwhile, the BSP head said they are not too worried about the recent performance of the peso.
“It’s not the numbers themselves (we worry about it), but the way peso depreciates. If depreciation is sharp enough, like two weeks, one month, it will lead to inflation.”
The Peso match against Greenback on Monday ended with a P57.04, strengthening 7 Centavos from Friday’s P57.11 finish. Amid hawkish comments from the U.S. Federal Reserve, the peso fell to the P58 level earlier this month.
“If there is such a fluctuation, we want to weaken it, but we don’t want to eliminate the swing itself. We want to keep the peso at a certain level. We want to prevent weakening it too much in a short period of time.”
Mr Remolona said the central bank has been intervening “a small amount”.
“We have a little bit of daily intervention just to limit volatility. We don’t want too much volatility. Volatility is bad for imports and exports,” he said.
“For the most part, it’s a strong dollar story, not a pesos. But some plots aren’t like that. In an episode in June, the pesos depreciated, but the dollar didn’t fully enhance.”
