BSP open to more rate cuts

MANILA, Philippines — The Bangko Sentral ng Pilipinas  is open to delivering policy rate cuts as early as its first meeting in 2025, but easing measures will remain aligned with the central bank’s forward guidance, BSP Governor Eli Remolona Jr. said.

“We would be open to a cut, given the data, of course,” Remolona said in an interview with Bloomberg TV yesterday.

He said the BSP would continue to monitor core inflation as prices are expected to ease in 2025 before slightly picking up in 2026.

The central bank is also worried about risks, which could de-anchor inflation expectations. Thus, Remolona said a measured approach to easing would be appropriate to mitigate risks in a volatile global economic environment.

Geopolitical developments, in particular, are seen as inflationary.

“When they spill over into the Philippine economy, I think the result will be somewhat higher inflation,” he said. “We don’t know how much higher, but more than before.”

The BSP lowered the borrowing costs for a third straight meeting last Thursday, cutting the key rate by 25 basis points to 5.75 percent from six percent previously.

Likewise, the overnight deposit and lending rates were reduced at 5.25 percent and 6.25 percent, respectively. The central bank has delivered a total of 75-basis-point rate cuts since August.

The reduction was due to expectations of inflation staying within the two to four percent target range over the policy horizon. It was also done to support the economy amid possible downside risks that could weigh on economic activity.

Meanwhile, Remolona said  the BSP does not directly track US policy rate changes. Instead, the central bank assesses the broader implications of Fed decisions, such as their impact on exchange rates and inflationary pressures.

“They’re less dovish than before. We ourselves are neither more dovish nor less dovish,” he said. “We’re still on the same trajectory as before.”

On the Philippine peso, which has faced renewed pressure due to the dollar’s strength, the BSP chief said the central bank is more concerned with the volatility than long-term depreciation.

“As you know, it’s not a weak peso; it’s a stronger dollar,” he explained, adding that the BSP monitors exchange rate movements daily and intervenes when necessary to maintain market stability.

The central bank also remains vigilant about the potential inflationary effects of a depreciating currency. “There’s a point when the depreciation of the peso becomes inflationary,” Remolona said. “There’s a threshold for that. A little depreciation is not inflationary, but at some point, it becomes inflationary, and we monitor that very closely.”

The BSP has finalized its calendar for 2025, with six monetary policy meetings scheduled. Exact dates are yet to be disclosed.