‘Inflation pressures may prompt BSP to pause’

Mactan, Cebu, Philippines — The Bangko Sentral ng Pilipinas could hold rates steady next month if inflation pressures intensify, but it could also further lower borrowing costs to support sluggish growth, according to BSP Governor Eli Remolona Jr.

On the sidelines of the 2024 BSP-IMF Systemic Risk Dialogue, Remolona   said there are inflation pressures in November that could prompt the Monetary Board to pause its easing cycle.

“We can cut (rates in December) or we can pause. The move will depend on the data,” he said. “Inflation pressures may cause us to pause a bit, but weak growth may cause us to cut.”

In a move to shift to a less restrictive monetary policy, the   central bank has been cutting the country’s benchmark interest rates since August, lowering the key rate by a total of 50 basis points to six percent.

Before the cuts, the BSP kept borrowing costs steady for six straight meetings starting November 2023.

According to Remolona, the main factor that will cause the BSP to hold rates steady is if inflation breaches the two to four percent target range in November.

“But it looks like inflation will still be within the target range,” he said.

BSP Assistant Governor Zeno Abenoja said the adverse impact brought about by the successive typhoons that hit the Philippines would be included in the November and December inflation data.

Headline inflation rose to 2.3 percent in October from 1.9 percent in September. Year to date, inflation averaged 3.3 percent, still within the BSP’s two to four percent target.

Meanwhile, the Philippine economy grew by only 5.2 percent in the third quarter, slower than the 6.4 percent in the previous quarter and six percent a year ago. From January to September, growth averaged 5.8 percent.

The BSP will also monitor the peso’s movement against the dollar. However, Remolona said the  weaker peso is not a significant factor in deciding the country’s monetary policy.