As inflation rates declined further in the third quarter, the Bangko Sentral ng Pilipinas is expected to cut policy rates by year’s end, a chief economist said on Friday.

In August 2024, the Monetary Board decided to reduce the BSP’s target Reverse Repurchase (RRP) rate by 25 basis points to 6.25 percent.

The interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.75 percent and 6.75 percent, respectively.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said the BSP might cut its policy rate again in December if overall inflation does not spike due to typhoons.

He added that continued inflows of imported rice from India, the world’s largest rice exporter, should prevent higher prices of the commodity in the Philippine market.

Ricafort also stressed that the implementation of a price freeze, especially on food, in areas in a state of calamity should help overall inflation stabilize.

 Based on the data from the Philippine Statistics Authority, overall inflation fell to 1.9 percent in September from 4.4 percent in July to 3.3 percent in August due to cheaper rice, fuel, and utilities.

BSP Governor Eli Remolona Jr. said prices of goods and services will remain “manageable.”

Nevertheless, as economic conditions can be unpredictable due to uncontrollable domestic and external factors, Remolona said the BSP always looks into the latest data in adjusting its policy rate for private banks.

Inflation within target

In its latest BSP Monetary Board meeting on 16 October, BSP Governor Eli Remolona Jr. said overall inflation this year could hit 3.1 percent or within the central bank’s target of 2 to 4 percent.

“Downside factors continue to be linked to the impact of lower import tariffs on rice,” he said.

The country’s headline inflation or overall inflation slowed down further to 1.9 percent in September 2024, the lowest inflation rate since the 1.6 percent inflation rate recorded in May 2020.

The inflation rate in August 2024 was recorded at 3.3 percent, which brings the national average inflation from January to September 2024 to 3.4 percent. In September 2023, the inflation rate was higher at 6.1 percent. 

However, Remolona said overall prices might increase slightly to 3.3 percent next year and 3.7 percent in 2026 partly due to higher global oil prices amid geopolitical tensions in the Middle East.