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July 19, 2024

BSP poised to maintain rates, aligning with US Fed’s stance

The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board is expected to keep policy rates unchanged during its meeting next week, according to an economist.

In a Viber message on Friday, Rizal Commercial Banking Corporation chief economist Michael Ricafort said that the BSP is likely to align with the US Federal Reserve’s recent decision to maintain policy rates.

“The BSP is expected to match any Fed rate cuts later in 2024 and in 2025 to maintain a healthy interest rate differential, which currently stands at 100 basis points: 6.50% for the BSP policy rate and 5.50% for the Fed Funds Rate upper limit,” Ricafort said.

The Monetary Board has kept policy rates unchanged for five consecutive meetings.

The BSP’s target reverse repurchase rate remains at 6.50 percent, with the interest rates on overnight deposit and lending facilities held steady at 6 percent and 7 percent, respectively.

The Monetary Board is set to meet on June 27 to decide on key interest rates.

“Any local policy rate cut will depend on inflation trends and the behavior of the U.S. dollar/peso exchange rate, which impacts import prices and overall inflation,” Ricafort added.

“The BSP is likely to match any potential Fed rate cut by late 2024 or 2025, especially if global crude oil prices continue to decline, supporting the achievement of inflation targets by the Fed and other global central banks. This is in response to the higher-for-longer interest rate stance, which has effectively slowed down the global economy and reduced demand for oil despite recent geopolitical challenges,” he added.