BSP easing ‘no longer likely to be as gung ho’

THE Bangko Sentral ng Pilipinas (BSP) will likely pursue cautious easing in view of the inflationary impact of US President-elect Donald Trump’s proposed tariffs.

“We expect the BSP to continue easing policy for the foreseeable future, given the current setting remains very tight in real terms,” Pantheon Macroeconomics said in a report.

“But we have pared back our expectations on the aggressiveness of this easing cycle, as the Fed (US Federal Reserve) is no longer likely to be as gung ho in view of the inflationary impact of President-elect Donald Trump’s proposed tariffs,” it added.

Trump has said that the US would slap tariffs of at least 10 percent on all imports and 60 percent on China-made goods if reelected.

Economists have warned that this could pose a risk to inflation and prompt monetary authorities to reconsider continued cuts to key interest rates.

The BSP’s policy rate currently stands at 6.0 percent following two 25 basis points (bps) cut in August and October. It is expected to follow this up with another 25-bp cut next month.

With Trump having won enough Electoral College votes to secure the presidency, Socioeconomic Planning Secretary Arsenio Balisacan said on Thursday that diversification was needed to insulate the local economy from protectionist policies.

With the US the biggest buyer of Philippine exports, he said that trade deals with other countries should be pursued.

Concerns over the Philippine peso, which has weakened as the dollar rose ahead of Trump’s win, have also raised concerns about the timing of the BSP’s easing. Some economists have said a pause could come in December.

The peso, which in September rose to the P55:$1 level, has slipped to $58:$1 territory. It closed 47 centavos stronger on Friday, ending the week at P58.26 to the greenback.

Other analysts, meanwhile, have said that fresh rate cuts were needed as economic growth slowed sharply to 5.2 percent in the third quarter from 6.4 percent three months earlier.

This has raised the likelihood that this year’s 6.0- to 7.0-percent growth target will be missed.

Pantheon Macroeconomics lowered its rate cut outlook to 25 bps for December, down from 50 bps previously, and also trimmed its 2025 estimate to 100 bps from 150 bps.