Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said the Monetary Board is still considering a pause in policy rate cut in December and a gradual reduction next year.
“We might pause in cutting the policy rate depending on the latest economic data,” Remolona on Tuesday told the media during a break from the third BSP and International Monetary Fund’s Systemic Risk Dialogue in Mactan, Cebu. The dialogue runs from 19 to 20 November.
As of Tuesday, Remolona said the Monetary Board deemed economic risks manageable, including the higher inflation last month at 2.3 percent from 1.9 percent in September based on data from the Philippine Statistics Authority.
Thus, the central bank governor said it is also possible that the Monetary Board will cut its policy rate next month.
Nothing is certain
“Nothing is certain yet about the monetary policy in December. If we cut in December, it will be a small reduction of 25 basis points,” Remolona said.
“That’s possible. We’re still in the easing cycle in the absence of big bad news. We also expect inflation this month to remain within the BSP target,” he said.
The BSP aims to stabilize inflation within 2 to 4 percent.
The BSP Monetary Board reduces its policy rate to private banks in anticipation of low inflation rates to help expand the economy by encouraging stronger consumption among households and firms through loans.
It had cut the policy rate by a total of 50 basis points in August and October toward the current 6 percent after growth in household consumption plateaued at 4.6 percent in the first and second quarters based on national statistics.
The data came after the central bank hiked its rate by 450 basis points until October 2023 to prevent higher inflation rates caused by excessive consumer spending post-pandemic.
For next year, Remolona said the Monetary Board is studying possible rate reductions in hopes of better local and global economic conditions.
“The figure could be less or more than 100 basis points. We have yet to see the November inflation to come up with a clearer policy,” he said.
Vigilant stance
“If we cut, the reduction will be gradual,” Remolona said.
This and his aforementioned statements came after inflation last month increased and Donald Trump was reelected to the US presidency.
National Economic and Development Authority Secretary Arsenio Balisacan said October inflation slightly rose due to higher transport costs of food and beverages and lower supply of agricultural goods, following the damaged infrastructure and farms left by typhoon “Kristine.”
Since the BSP’s Monetary Policy meeting in October, the country has been hit by three more typhoons this month named “Nika,” “Ofel” and “Pepito.”
The National Disaster Risk Reduction and Management Council has reported that infrastructure damage had already amounted to over P469 million and around P8.6 million in agricultural losses.
Apart from bad weather, economists have also cautioned the public about possibly high inflation rates due to economic policies by incoming US president of Donald Trump.
Trump had said he would impose high tariffs on all imports at 10 to 15 percent and even up to 60 percent on Chinese goods, and economists say the higher costs would be passed on to consumers.
