Philippine central bank on hold for rest of year, cut in early 2024: Reuters poll
2023.06.20 08:10
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© Reuters. A man counts a wad of Philippine Peso bills he received from a relative working abroad at a money remittance center in Makati City, Metro Manila, Philippines September 19, 2018. REUTERS/Eloisa Lopez
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By Veronica Dudei Maia Khongwir
BENGALURU (Reuters) – The Philippine central bank will leave its key interest rate unchanged at 6.25% for a second straight meeting on Thursday and the remainder of the year as price pressures ease, a Reuters poll of economists found.
Inflation has steadily decreased from a 14-year peak in January and slowed for the fourth straight month in May to 6.1%, although still well above the 2-4% target range.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said on Monday that expectations inflation will fall below 4% before year-end is “a good reason to pause.”
All 24 economists polled June 13-19 forecast the BSP will hold its benchmark overnight borrowing rate at 6.25% at its policy meeting on June 22.
A strong majority of respondents, 14 of 17, forecast rates will stay at 6.25% for the rest of the year with the remaining three predicting a rate cut by end-2023.
The central bank, which had previously closely followed the U.S. Federal Reserve in hiking interest rates, is now charting a distinct course.
BSP Deputy Governor Francisco Dakila Jr. said last Thursday it may not move in complete lock-step with the Fed if domestic inflation warrants a different response.
“What the BSP will be affected by is the fact that they will not start cutting earlier if the Fed remains hawkish,” said Shreya Sodhani, regional economist at Barclays (LON:).
“In later meetings if the Fed hikes, the BSP is likely to stay on hold. But when the Fed starts cutting, that’s when the BSP will start to again replicate what the Fed is doing.”
The Fed kept interest rates unchanged at 5.00%-5.25% last week but signaled it may still hike by as much as half of a percentage point by end-2023.
Among economists who had a longer-term view on rates, over 70% of respondents, 10 of 14, forecast the BSP will cut rates to 6.0% or lower in the first quarter of 2024, while the remaining four forecast rates to remain unchanged.
