MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is a “bit less likely” to cut borrowing costs at its policy review next week as headline inflation rose to a nine-month high in July, its top official said.
On the sidelines of the BSP’s financial services cyber resilience plan (FSCRP) launch, BSP Governor Eli Remolona Jr. said the July inflation was slightly worse than expected.
“(We’re) a little bit less likely (to cut policy rates) because inflation is high. But we have to look at other numbers,” he told reporters.
Headline inflation surged to 4.4 percent in July from 3.7 percent in June. It marked the highest inflation print in nine months or since the 4.9 percent in October 2023.
It also breached the BSP’s two to four percent target for the first time in eight months. From January to July, inflation averaged 3.7 percent.
According to Remolona, base effects added 0.3 percentage points to the headline print.
“(July inflation) is really 4.1 percent, which is still worse than expected but not that bad because it only breached the (two to four percent) ceiling for quite a bit,” he said.
Asked if the Monetary Board would still consider cutting interest rates at its Aug. 15 meeting, Remolona said the BSP would look at other data, including the second-quarter gross domestic product (GDP) data to be released on Thursday.
“If growth is unexpectedly weak, and then it looks like our projections of inflation and inflation expectations suggest lower inflation going forward, we can cut,” he said.
The BSP is also open to an off-cycle rate cut in case it keeps borrowing costs unchanged next week, he said.
After Aug. 15, the BSP is scheduled to conduct two more policy reviews on Oct. 17 and Dec. 19.
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