INTEREST rate cuts could still start in the second half (H2), analysts said, despite the central bank chief having said that these may be delayed to the first quarter of 2025.
Monetary authorities on Monday kept the Bangko Sentral ng Pilipinas' (BSP) benchmark rate unchanged at a near 17-year high of 6.5 percent, citing continued inflation pressures.
Forecasts for consumer price growth were raised and while these remained within the 2.0- to 4.0-percent target, BSP Governor Eli Remolona Jr. told reporters that "we're feeling a bit more hawkish than before."
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. Photo from BSPGood news on the inflation and economic growth fronts could prompt a third quarter easing, he added, while the opposite means that key rates would stay higher for longer until the first quarter of next year.
Oxford Economics Japan economist Makoto Tsuchiya agreed that rate cuts could be delayed but said the BSP may still begin easing in the third quarter (Q3).
"Given upside domestic inflation risks as well as chances that the US Fed (Federal Reserve) might delay its easing cycle, the risk for BSP is tilted to a later start of the rate cuts," he noted.
"We think BSP is unlikely to move before the Fed, as a narrower interest rate differential will weigh on the peso," Tsuchiya added.
"If domestic demand holds up well or the country's electronics sector benefits from the AI (artificial intelligence) chip boom more than we expect, this will give BSP room to remain patient until Q3 to start the rate cutting cycle."
Pantheon Macroeconomics economist Miguel Chanco said he still expected the first of four 25-basis-point cuts to start in June, while HSBC Global Research economist Aris Dacanay also reiterated his view of a 25-basis-point (bps) cut in the third quarter and 50 bps in the last three months of the year.
"With growth in the Philippines very resilient, the BSP, in our view, can afford to delay its first rate cut if it needs to support the peso or to cool inflation further," Dacanay also said.
Bank of America Global Research, meanwhile, said it now expects the BSP to initiate rate cuts no earlier than August 2024, instead of June previously, to be followed by additional cuts in October and December, amounting to a total reduction of 75 basis points.
The US central bank, meanwhile, will likely reduce its policy rate by 25 basis points in June, September and December, it added.
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