MONETARY authorities are likely to implement another rate cut this year, the central bank chief said, hoping it will significantly impact the country's growth.
"We will always be assessing the situation. But given our current assessment, I think we have room for one more cut this year," Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said on Friday.
The Monetary Board reduced interest rates on Thursday by 25 basis points to 6.25 percent, ending the 17-year high of 6.5 percent.
Remolona stated that headline inflation is expected to decrease to within the government's 2- to 4-percent target range despite the increase in July, adding that the risks to inflation are mostly on the downside for 2024 and 2025, with a slight risk of increase in 2026.
"All the factors that we considered that are risky on the high side seem very unlikely. So I think we're very confident that inflation is on its way down," Remolona said.
The BSP adjusted its inflation forecast for this year until 2026, saying that the inflation outlook continues to lean toward the downside.
Risk-adjusted forecast for 2024 was raised to 3.3 percent from 3.1 percent and that for 2025 was cut to 2.9 percent from 3.1 percent. The central bank, meanwhile, expects inflation to rise to 3.3 percent in 2026.
The baseline forecast for this year was also adjusted to 3.4 percent from 3.3 percent, while that for 2025 was trimmed to 3.1 percent from 3.2 percent. For 2026, the BSP expects inflation to settle at 3.2 percent.
The BSP chief has also maintained his view that another 25 bps cut will be ordered later this year.
The Monetary Board has only two meetings remaining, scheduled for October 17 and December 19.
Rate cut to spur growth
Remolona is hopeful that the rate cut will significantly impact the country's growth.
"Actually, the relevant policy horizon is 2025 because our monetary policy transmission mechanism has long lags," Remolona said.
"So we cut yesterday (August 15), we might cut again sometime during the year and then we hope that has a significant effect on growth," he added.
Gross domestic product growth came in stronger in the second quarter of 2024 at 6.3 percent, higher than the previous year's 4.3 percent.
Remolona said that growth could go higher than the lower-end target of the government.
"I think this puts us in the lower part of the range for 2024. The projection by the national government is between 6.0 and 7.0 percent, I think, and we will be close to 6.0 percent, maybe a bit above it for 2024," Remolona said.
To date, the country has already hit the lower-end target at 6.0 percent.
Socioeconomic Planning Secretary Arsenio Balisacan said that the country needs to grow at least 6.0 percent in the last two quarters in order to hit the target.
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