Central Bank of Philippines plans to cut rates in 2024
2023.01.12 03:17
Central Bank of Philippines plans to cut rates in 2024
By Ray Johnson
Budrigannews.com – On Thursday, the governor of the Philippines’ central bank mentioned the possibility of lowering bank reserve requirements in the first half of this year and expressed the hope that benchmark interest rates could be reduced in 2024 once inflation was under control.
In a speech delivered at a Rotary Club event, Governor Felipe Medalla of the Bangko Sentral ng Pilipinas (BSP) stated that, despite the fact that sluggish domestic demand will propel the economy this year, it will likely diminish by 2024.
He stated, “Hopefully, by 2024, when pent-up demand is gone, then monetary policy will be much looser than what we have now.”
Since last year, global central banks, led by the U.S. Federal Reserve, have raced to contain high inflation by raising benchmark rates significantly, which has slowed economic growth and fueled fears of a recession.
According to Medalla, the banks’ reserve requirement ratio could be one more easing measure, with a high likelihood of being reduced in the first half.
He stated, “Cutting the RRR is very important to us.”
In March 2020, the RRR, or the percentage of deposits and deposit substitutes that banks are required to keep with the BSP, was cut by 200 basis points to 12 percent.
According to Medalla, the BSP is prepared to take additional monetary policy measures to restore inflation to a target-consistent path.
Food and energy costs were primarily responsible for the 8.1% increase in December’s consumer price index (PHCPI=ECI) to a 14-year high. The number brought the average annual inflation rate to 5.8%, also a 14-year high and higher than the official target range of 2%-4%.
Medalla stated, “We need not match the U.S.’s policy rate increase, but if it’s 50 (basis points), it’s hard not to respond, at least partially.”
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