December 9, 2024 | 12:00am
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) may further lower its policy rates this month amid manageable inflation in November and weaker-than-expected economic growth in the third quarter.
In a report, ANZ Research said the central bank could cut its key rate by 25 basis points to 5.75 percent at its Dec. 19 policy meeting, following the release of November inflation data.
“Overall, the inflationary pressures were not broad-based and the near-term outlook remains benign. Therefore, we think the BSP will lower its policy rate by 25 basis points at its next meeting in December along with cumulative cuts of 75 basis points in 2025 to help bolster domestic demand,” it said.
Headline inflation quickened to 2.5 percent in November from 2.3 percent in October, marking its second straight month of increase. This brought the average inflation for January to November to 3.2 percent.
The uptick in inflation was caused by tighter food supply conditions, particularly on local vegetables and meat, due to several typhoons that damaged agricultural lands.
Aris Dacanay, economist for ASEAN at HSBC, said the soft inflation print could encourage the Monetary Board to cut rates next week to support growth.
“The good news is that rice prices have decelerated significantly, many thanks to lower rice tariff rates. Given how heavily weighted rice is in the Philippines’ consumer basket, headline inflation remained within the lower portion of the BSP’s target band,” he said.
However, the upside risk to monetary policy is the volatility in the foreign exchange market. Last month, the peso depreciated to an all-time low of 59 against the dollar.
“It will be key to monitor the tone of the US Fed in the next two weeks. Any shift to a more hawkish rhetoric may introduce volatility in the currency and prompt the BSP to pause its easing cycle,” Dacanay said.
Based on data from the Bankers Association of the Philippines, the peso rebounded to the 57 level last week, strengthening by 14.5 centavos to close at 57.735 on Friday.
In a move to shift to a less restrictive monetary policy, the Philippine central bank has lowered rates by a total of 50 basis points since August. This brought the key rate to six percent from 6.5 percent previously.
Prior to the cuts, the BSP kept borrowing costs steady for six straight meetings starting November 2023. From May 2022 to October 2023, it hiked rates by 450 basis points to tame inflation.
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