The Bangko Sentral ng Pilipinas (BSP) may still consider an interest rate adjustment in August despite the expected faster inflation in July, Governor Eli Remolona Jr. said Wednesday night.
“I think Aug. 15 is still a possibility. Of course, it will depend on the numbers,” said Remolona who is also the chairman of the policy-setting Monetary Board.
Remolona reiterated that the BSP was looking at 50-basis-point total reduction in policy rates this year, including a possible 25-percentage-point cut in August and another later this year.
The BSP said it expected the July inflation to settle within a range of 4.0 percent to 4.8 percent, higher than 3.7 percent in June, on the back of higher electricity rate, agricultural commodities and higher domestic oil prices.
Remolona said the lower import tariff on rice would help ease inflation in the coming months. “Given the lower tariffs of rice, that will lead to more moderate inflation, significantly moderate, so that’s a good thing that will help us ease monetary policy,” he said.
Bank of the Philippine Islands (BPI), the financial unit of the Ayala Group, also expects the BSP to implement two rate cuts this year.
BPI president and chief executive Jose Teodoro Limcaoco said in a news briefing the first rate could happen in August, followed by another after a couple of months depending on how inflation rate pans out.
“When you look at the macro fundamentals, inflation is clearly under control, and economic growth is pretty strong,” Limcaoco said.
He said the US Federal Reserve also hinted a possible rate cut in September. “So, there are no hindrances [for the BSP] to cut rates in August,” Limcaoco said.
Limcaoco said while the potential rate could affect banks’ margins, this would be good for the economy, particularly for the consumers and corporates. He said that as rates start to come down, BPI would beef up its consumer loans, targeting small and medium enterprises and retail, which deliver higher yields.
“That allows us to weather better the lowering of rates. Loans that are most sensitive to policy rates are corporate loans. The consumer and SME loans are not as sensitive,” he said.
Limcaoco said he also expects real estate loans to improve as rates go down.
BPI, which is celebrating its 173rd anniversary this year, booked a record net income of P30.6 billion in the first half of 2024, up by 21.5 percent from a year ago.
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