The Bangko Sentral ng Pilipinas (BSP) has kept its benchmark interest rate at 6.5 percent during its June 27 policy meeting, citing a reevaluation of inflation risks that now suggest a trend towards moderation in 2024.
The decision reflects the BSP’s expectation that inflationary pressures will ease in the latter half of the year.
During a press briefing on Thursday, BSP Governor Eli M. Remolona Jr. reaffirmed the central bank’s plan to reduce rates by a total of 50 basis points (bps) this year, with an initial 25 bps cut expected at the upcoming August 15 meeting.
“We maintain a somewhat hawkish stance, albeit less pronounced. Our policy now leans more dovish,” Remolona told reporters, signaling a readiness to lower rates to stimulate economic growth. In central banking terminology, a hawkish stance typically aims to curb inflation through rate hikes, while a dovish stance indicates readiness to support economic expansion through rate cuts.
Remolona also outlined the BSP’s strategy to implement 25 bps rate reductions in both the third and fourth quarters.
The BSP’s Monetary Board, noted that downside risks to the inflation outlook have increased for both 2024 and 2025, primarily due to reduced import tariffs on rice following Executive Order 62.
However, uncertainties remain, particularly regarding elevated prices of non-rice food items, transportation costs, and electricity rates, which could exert upward pressure on inflation.
The BSP adjusted its inflation forecasts downward for 2024, now expecting a risk-adjusted rate of 3.1 percent, down from the previous estimate of 3.8 percent. Similarly, the forecast for 2025 has been revised to 3.1 percent from 3.7 percent.
It expects inflation to temporarily breach the upper end of the target range or exceed four percent in July but sees it stabilizing within the two to four percent band in subsequent months.
