The Finance Secretary of the Philippines, Ralph Recto, predicts that the country’s central bank, Bangko Sentral ng Pilipinas, will likely lower its key interest rate following the Federal Reserve’s policy easing. Recto anticipates more than one rate cut this year, depending on how inflation and the spread of Fed rates over domestic rates are considered. He emphasizes the importance of assessing the impact on exchange rates and local inflation before any decision is made.
Recto’s outlook on the timing of rate cuts is more definitive than that of BSP Governor Eli Remolona, who has shown a willingness to ease before the Fed. Both officials, along with Monetary Board Member Benjamin Diokno, agree on the likelihood of multiple rate cuts this year. With the peso trading near a record low against the dollar, the timing of the BSP’s easing in response to the Fed’s actions is closely monitored, especially as the currency remains the worst-performing in Asia this quarter.
Despite President Ferdinand Marcos Jr.’s acknowledgement that inflation is a significant issue for the Philippines, the central bank is expected to potentially reduce its policy rate in August and potentially again later this year. Recto suggests the possibility of four rate cuts next year, noting a total reduction of 150 basis points through 2025. With inflation remaining within the BSP’s target range, the effects of global price increases on the country’s economy are recognized as a challenge beyond the government’s control.
