📷 Finance Secretary Ralph Recto | Philippine News Agency
Finance Secretary Ralph Recto hinted at the possibility of the Bangko Sentral ng Pilipinas (BSP) lowering interest rates this year, with a more significant reduction expected in 2025.
Recto, a member of the seven-person policy-making monetary board, stated that a rate cut in the third quarter is “very much possible,” with a potential reduction of 150 basis points over the next two years.
“Surely, I don’t expect interest rates to go any higher. If not, if there is time, they will start to go down, maybe 150 bps in the next two years,” Recto told an economic forum.
In its most recent monetary policy meeting earlier this month, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) maintained the benchmark policy rate at 6.5%, the overnight deposit rate at 6.0%, and the overnight lending facility rate at 7.0%, marking the highest levels in 17 years since May 2007.
This decision follows the central bank’s revision of its risk-adjusted inflation outlook for 2024 to 3.8 percent, with the baseline forecast adjusted to 3.5 percent. For 2025, the risk-adjusted forecast was set at 3.5 percent, and the baseline at 3.3 percent.
Annual inflation accelerated for the third consecutive month in April, reaching 3.8 percent, and bringing the average rate for the first four months of the year to 3.4 percent, which remains within the central bank’s target range of 2 to 4 percent.
At the same economic forum, BSP Senior Assistant Governor Iluminada Sicat said the pace of consumer price increases should “revert back to targe range” while the central bank anticipates “higher inflation” from May to July.
Sicat mentioned that the BSP will be “cautious about lowering the interest rate too soon” to manage the potential risks of rising inflation.
Meanwhile, the National Economic and Development Authority (NEDA) said that the headline inflation rate in May is expected to stay within the government’s 2 to 4 percent target.
“It [May inflation] can be lower or it can be higher than 3.8 [percent], but we expect to be in that range,” Balisacan said.
“We are still aiming for 2 to 4 percent, the target for the year. I think that we should be there,” Balisacan added. (TCSP)
