As inflation rates continued to decline in the third quarter, the Bangko Sentral ng Pilipinas (BSP) is expected to cut policy rates by year-end, according to a chief economist on Friday.

In August 2024, the Monetary Board reduced the BSP’s Target Reverse Repurchase (RRP) Rate by 25 basis points to 6.25 percent, with the overnight deposit and lending rates adjusted to 5.75 percent and 6.75 percent, respectively.

Rizal Commercial Banking Corp. Chief Economist Michael Ricafort indicated that the BSP might lower its policy rate again in December if inflation remains stable despite potential typhoon impacts. He noted that the continuous inflow of imported rice from India should help keep rice prices stable in the Philippine market. Ricafort added that the implementation of a price freeze on essential items, especially food, in areas under a state of calamity could further support inflation stability.

Data from the Philippine Statistics Authority show that overall inflation decreased to 1.9 percent in September, down from 4.4 percent in July and 3.3 percent in August, due to cheaper rice, fuel, and utilities.

BSP Governor Eli Remolona Jr. remarked that prices of goods and services are likely to remain "manageable." However, he emphasized that economic conditions are susceptible to external and domestic factors, which the BSP considers when adjusting policy rates for private banks.

Inflation within target

In the recent BSP Monetary Board meeting on 16 October, Remolona projected an overall inflation rate of 3.1 percent for the year, within the central bank’s target range 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 reached a four-year low of 1.9 percent in September, down from 3.3 percent in August, bringing the average inflation for January to September 2024 to 3.4 percent. In September 2023, inflation was notably higher at 6.1 percent.

Remolona noted that overall prices might slightly increase to 3.3 percent in 2025 and 3.7 percent in 2026, partly due to rising global oil prices amid geopolitical tensions in the Middle East.