Finance Secretary Recto on 50 bp cut: 'I think we can'

On Tuesday, Department of Finance Secretary Ralph Recto [link] noted the US Federal Reserve’s 50 basis point cut and said, “I think we can also do half a percent.” Mr. Recto is one of seven members of the BSP’s Monetary Board, which is the entity responsible for setting our benchmark interest rate. The Governor of the BSP, Eli Remolona, is also a member of the Monetary Board (and also its Chairman); in August, he said that the BSP had room to make a 25 bp cut in FY24, but yesterday he updated these remarks by saying that we could get two 25 bp cuts in the final two Monetary Board meetings this year.

MB bottom-line: Now that the pivot is officially here, central banks are falling all over themselves to cut rates and boost economic health. That’s the main thing now that the high bar effect has removed the fear from the monthly inflation prints. Prices are still as high as they’ve ever been, but now that the rate of increase has cooled off to something that looks more familiar, the DoF and BSP seem to be shifting focus to boosting the GDP. Lower rates and lower RRR should give the Government all of the resources it needs to get the job done. I don’t want to be a cynic, but it’s hard to ignore that the Government's failure to act on the supply-side issues in a timely fashion was one of the leading causes of food price inflation and that the Government has had trouble deploying large amounts of development capital at scale for many years now.

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