📷 alchetron.com
Finance Secretary Ralph Recto said on Wednesday that he expects the Monetary Board to start cutting rates later this year on the back of the high inflation rate and slow economic growth.
The Finance Secretary said this in a chance interview with the reporters as the Philippine central bank will hold its policy meeting this Thursday, May 16.
Many private-sector economists believe Bangko Sentral ng Pilipinas will maintain its key interest rate at 6.5 percent for its fourth consecutive meeting.
“Well, number one, we’ll take a look at the data. But so far, the way I see it, unless something changes between now and then, I think more or less, more or less, it’s more or less steady,” Recto said.
“I expect rates to go lower. Maybe not this monetary board meeting, but it’s possible that within the end of the year, there could be a possible reduction in rates,” he added.
When asked about the timing of these potential rate cuts, Recto said it’s possible in the fourth quarter of this year.
The Finance Secretary expressed optimism about the country’s economic growth, despite the softer-than-expected Gross Domestic Product (GDP) figures.
Latest data from the Philippine Statistics Authority showed that the Philippine economy grew at a slower pace in the first quarter of 2024 at 5.7 percent from last year’s 6.4 percent expansion.
But on a quarterly basis, the latest GDP print is higher than the revised 5.5 percent figure reported for the fourth quarter of 2023.
He attributed the solid growth figures to underlying strengths within the economy, noting, “That’s why we grew by 5.7 percent, right? But that’s still a good growth rate. It’s still one of the highest.”
However, Recto said inflation remains a significant concern, influencing central bank policies.
Recto highlighted that the central bank’s stance would largely depend on inflation trends, which are currently “lower than expected.”
For context, latest data from the Philippine Statistics Authority (PSA) showed that headline inflation last April settled at 3.8 percent, significantly lower than the 6.6 percent recorded in the same month last year.
While headline inflation last month was within the government’s 2 to 4 percent target, it was slightly higher than the 3.7 percent in March this year.
Despite this, he anticipates that inflation might be “sticky,” potentially rising next year, which could impact monetary policy.
Regarding the peso’s performance, Recto acknowledged that it plays a critical role in decision-making about interest rates, suggesting a link between the currency’s stability and the decision to keep rates steady.
To further boost the economy, Recto remains bullish about achieving a higher growth target. He is confident that the Philippines can reach a 6% growth rate by year-end, bolstered by slowing inflation rates and stabilizing prices.
(TCSP)
