Fitch: New central bank rate cuts loom

Fitch Ratings projects central banks in emerging markets (EMs) to lower interest rates until next year, mirroring the possible rate cuts of the US Federal Reserve as a way to reduce debt payments and drive economic growth.

The global credit watchdog said the Federal Reserve might cut its policy rate by 25 basis points (bps) each this month and the next, and a total of 100 bps in 2025.

The US central bank previously announced a 50bps cut in September as the US inflation hit its lowest at 2.5 percent during that month from a high in February 2021.

“Lower US interest rates should create space for domestic monetary easing in many EMs, providing support to EM economic growth prospects, as well as reducing repayment burdens for issuers that have borrowed on domestic debt markets,” Fitch Ratings said in its report.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said there is a possibility for a 25 points reduction in the final Monetary Board meeting next month.

He stressed a 50 bps cut would be “too aggressive” as he expects local inflation to remain “manageable.”

In the BSP Monetary Policy meeting last 16 October, Remolona said inflation this year could hit 3.1 percent or within the central bank’s target of 2 to 4 percent.

Lower tariffs, a downside

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

However, Remolona said inflation might increase slightly to 3.3 percent next year and 3.7 percent in 2026 partly due to higher global oil prices.

For October, he said inflation might rise to 2 to 2.8 percent from 1.9 percent in September due to higher fuel prices and peso depreciation.

Remolona said the BSP will also consider the Philippine economic growth for the third quarter and the actual October inflation print in deciding its next policy adjustment.

Meanwhile, Finance Secretary Ralph Recto said the country’s fiscal goals are on track as it prefers borrowing from domestic sources to make up 75 percent of all government loans.

The national government’s outstanding debt slightly increased as of end-September by 2.2 percent to P15.89 trillion from the level recorded as of end-August, the Bureau of the Treasury reported.