Remolona says: BSP can hold rates ‘for the time being’

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) can keep the country’s policy settings unchanged, but a rate cut is still possible if price pressures continue to ease.

During a budget hearing, BSP Governor Eli Remolona Jr. said the balance of risks to the inflation outlook shifted to the downside and inflation expectations are well anchored.

“Evolving inflation conditions show that the BSP can hold its policy settings steady for the time being,” he said. “If price pressures continue to ease, it will be possible for the BSP to consider a less restrictive monetary policy stance.”

However, Remolona said it is crucial to continue close monitoring of the risks to the inflation outlook amid lingering supply-side concerns and geopolitical risks.

He added that the national government’s non-monetary measures and programs play an important part in helping ease inflation pressures.

Some of the more notable initiatives include tariff modification and importation measures, such as the lower import tariffs on rice under Executive Order (EO) 62, which are expected to help improve food supply.

“The recent government decision in EO 62 to reduce the tariff on rice will be so helpful in our efforts to tame inflation. In the BSP’s latest forecast, the rice tariff reduction will have a very significant downside impact on the inflation trajectory until 2025,” he said.

“There is also the strong push to enhance productivity through the provision of high-quality seeds, farm and fishery gear and equipment and other policies that address supply issues,” the BSP chief added.

Last week, Remolona said inflation could peak in July, even if it breached the two to four percent target, as the headline rate is poised to slow down for the rest of 2024.

The BSP expects inflation to settle within the four to 4.8 percent range in July. If realized, July inflation may breach the two to four percent target for the first time in seven months.

Based on central bank forecasts, headline inflation is expected to remain within the two to four percent target range for both 2024 and 2025.

“The BSP will continue to support policies that promote price stability, financial stability and an efficient payments and settlement system, which we think are essential for sustainable and inclusive growth,” Remolona said.

The BSP chief had also said the BSP may cut rates by a total of 50 basis points this year, with 25 basis points in August and another 25 basis points in the fourth quarter.

The Philippine Statistics Authority is set to release its July inflation data today and its second-quarter gross domestic product data on Thursday.