The Bangko Sentral ng Pilipinas (BSP) [link] Governor, Eli Remolona, said he thinks 50 basis points of rate cuts in FY25 “sounds about right”, with a 25bp cut in H1 and a 25bp cut in H2. According to ABS-CBN, Mr. Remolona said that “persisting inflation” makes the original 75bp to 100bp of cuts for FY25 unlikely. Mr. Remolona also said that he and the Monetary Board were talking about reducing the Reserve Requirement Ratio (RRR) by 200 basis points in June or July.
MB bottom-line: That’s not a great sign for the stock market or for the broader economy, but the huge reduction in expected cuts is not coming out of nowhere. The US Federal Reserve hit the “pause” button last week, c-c-c-combo breaking its streak of three straight rate cuts and tempering expectations due to the continued persistence of inflation. Trump is effectively button-mashing the US economy, but as anyone who has ever fought against a button-masher will tell you, it’s a hard match because the regular ebb and flow of the game is just not there. We can’t predict what will happen with great certainty, and I think some of that uncertainty is seeping into the BSP’s analysis and making it more cautious. The RRR reduction is something that just pisses me off, though, because remember back when the BSP made a big show of “bribing” the banks with an RRR cut to get the banks to eliminate small value transfer fees that disproportionately tax the poor? Well, here we have the BSP openly discussing yet another RRR cut, but nothing about the small value transfer fees. Looks like our banks, which are already the most profitable that they’ve ever been, will just not stop taking as much as they can from the poorest in the country. I think that’s an ugly look at a time when families are struggling to make ends meet. Maybe that’s just me.
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