Policy easing ideal as inflation falls
Falling rice and transportation prices were essentially behind lower inflation
Falling rice and transportation prices were essentially behind lower inflation
According to ING Philippines, March’s below-target consumer price index (CPI) inflation and the global growth uncertainty caused by US tariffs strengthen expectations of a rate cut by the Bangko Sentral ng Pilipinas (BSP) in next week’s policy review.
The view is further supported by a stable local currency and high policy rate, Deepali Bhargava, regional head of Research, Asia-Pacific, explained.
It was also good news for core CPI inflation, which edged down to 2.2 percent from a year ago. This was the third consecutive annual decline and neared the lower bound of the central bank’s target range.
This indicates that lower inflation is driven not only by food and fuel prices but also by slowing demand pressures.
Falling rice and transportation prices were essentially behind lower inflation.
Although the Philippines is well-positioned with a lower tariff rate and reduced exposure to US exports, it is unlikely to remain completely unaffected.
According to ING’s estimates, direct and indirect exports of goods from the Philippines to the US account for approximately three percent of the Philippines’ gross domestic product (GDP).
Moreover, the tariffs imposed by US President Trump will exert downward pressure on US growth and the Federal Reserve to cut rates.
“We continue to forecast September and December rate cuts with a third in March 2026, but the gloomier near-term outlook for the economy means that risks are skewed to the central bank having to do more this year,” Bhargava said.
“This should take away concerns around the Philippines cutting rates too fast too soon and staying largely aligned with US rate actions,” she added.
Following the tariff announcements, the Philippine peso has strengthened against the US dollar, and the actual policy rate surged close to all-time highs of four percent after the March inflation print. This presents an opportune moment to cut rates to support growth, according to ING.
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