INFLATION will likely not breach target this month, Cabinet officials said, supporting the central bank's more dovish outlook on interest rate cuts.

Speaking at the Philippine Economic Briefing on Monday, both Finance Secretary Ralph Recto and Socioeconomic Planning Secretary Arsenio Balisacan said that May consumer price growth was expected to stay within 2.0-4.0 percent.

"I would expect [it to be within target]," Balisacan said, "but I know I've been proven wrong before ... but so far, there have been no surprises."

Recto said that rice inflation, which was instrumental in the ongoing rise in inflation, was expected to decline moving forward given lower prices due to increased output and lower tariffs.

Inflation, earlier expected to top 4.0 percent in the second quarter, was a lower-than-expected 3.8 percent in April. Data for May will be released next week.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. has said that inflation could breach the target this month but then decline moving forward and that monetary authorities could start easing policy as early as August.

The BSP's policymaking Monetary Board earlier this month kept key interest rates steady, noting that inflation expectations remained tilted toward the upside.

However, it lowered the risk-adjusted and baseline forecasts for this year to 3.8 percent and 3.5 percent from 4.0 percent and 3.8 percent, respectively.

Those for 2025 were raised to 3.7 percent from 3.5 percent and 3.3 percent from 3.2 percent.

Economists polled by the BSP also have also lowered their inflation expectations and said that rate cuts of as much as 150 basis points (bps) could be ordered this year.

Preliminary results of the BSP's survey of external forecasters for May led to a mean inflation forecast of 3.7 percent for this year, down from 3.8 percent in April, the central bank said in its latest Monetary Policy Report.

The mean forecast for 2025, meanwhile, was unchanged at 3.5 percent but was higher at 3.5 percent for 2026 from 3.4 percent.

Monetary policy settings are expected to remain unchanged for the first half, and majority of the analysts expect this to extend to the third quarter.

Some, however, expect a 25-bps cut in July-September and "by the end of 2024, the BSP is expected to reduce the policy rate by 25 to 150 bps," the central bank said.

"For 2025, BSP is seen to further loosen its policy stance by a range of 25 to 250 bps. For 2026, analysts expect an additional reduction of about 50 to 150 bps in the policy rate."

The central bank's benchmark rate currently stands at 6.5 percent, the highest since 2007, following a 450 basis points of hikes beginning May 2022 as inflation surged in the wake of Russia's invasion of Ukraine.

Recto, a member of the BSP's policymaking Monetary Board, told the Philippine Economic Briefing that he expects cuts totaling 150 bps up to next year.

"It's possible that you may have a rate cut this year and possibly more rate cuts next year. Surely, I don't expect interest rates to go any higher," he added.

Remolona's having flagged an easing as early as August, ahead of the US Federal Reserve that is widely seen to start doing so in September, led to a run on the peso.

The currency, which fell to an 18-month low last week, regained some ground on Monday but remained at the P58:$1 level.

Remolona has downplayed the drop, noting the country's ample reserves, and said that the Fed's moves were only one of many data points to be considered.

International Monetary Fund Resident Representative Ragnar Gudmundsson agreed that the BSP should be data-dependent but added that it should still consider the Fed's actions.

"I know they're moving in the right direction because we are now back within the BSP's target range ... the trends are encouraging," he said.

"However, I think we need to be aware that there are still upside risks to the inflation outlook."

Given the upside risks, he said the central bank "should probably maintain a sufficiently restrictive monetary policy stance until we are really firmly within the BSP's target band."

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