The International Institute of Finance (IIF), the global association of the financial industry comprised of some 400 members from over 60 countries worldwide, projects the Bangko Sentral ng Pilipinas to ease its policy rate further in June, ahead of the US Federal Reserve’s likely own reduction in July.
The IIF’s latest analysis on the global economy said the BSP will likely ease its benchmark for lending rates further on 19 June.
The BSP first reduced its rate by 25 basis points this year on 10 April after the local inflation in March hit 1.8 percent, the lowest since May 2020 based on data from the Philippine Statistics Authority.
The IIF said overall prices of goods in Asian emerging economies could continue to remain low as the weakening US dollar (USD) makes imports cheaper despite threats of Trump tariffs.
“Portfolio rebalancing by foreign investors away from an overweight position in US assets is likely an important driver of USD weakness and explains, at least partly, the different USD performance this time around,” the institute said.
Following US President Donald Trump’s announcement of a 17 percent tariff on Philippine goods on 2 April, the US dollar has depreciated against the peso by 2.37 percent based on data from the Bankers Association of the Philippines.
This, said the IIF, signals an opposite trend to the foreign exchange movements during the 2008 Global Financial Crisis when the US dollar appreciated against Asian currencies to 5 percent from a depreciation of about 5 percent.
Given the likely slower global economic growth under a high-tariff environment, the IIF said the BSP will “front-load” rate cuts to grow domestic consumption of goods and services among households and firms while export revenues moderate.
The central bank is seen to deliver the cuts also before Trump lifts the 90-day pause on tariffs for other countries, except China.
“US tariffs are expected to slow global growth, including for Asia, via a slowdown in global trade,” the institute said.
The trade outlook should further support lower energy prices in most Asian countries, the IIF said.
“The weaker USD has not provided support for energy prices, which are instead pricing in the negative impact of US tariffs on global growth and therefore energy demand,” it said.
“Most of Asia, with the exception of Malaysia, are net energy importers and therefore lower global energy prices will help their trade balances as well as contain inflationary pressures,” the institute continued.