SLOWING inflation has given the Bangko Sentral ng Pilipinas (BSP) room to pursue a measured easing of monetary policy, its top official said.
In an interview with Global Finance magazine that came out on Tuesday, central bank Governor Eli Remolona Jr. said even if some risks materialize, inflation would average 3.3 percent this year, 2.9 percent in 2025 and 3.3 percent the year after that, within the 2.0- to 4.0-percent target range.
"With inflation now on a target-consistent path, we have room for a calibrated shift to a less restrictive monetary policy stance," he added.
The BSP kicked off an easing cycle in August, cutting the policy rate by 25 basis points (bps) to 6.25 percent and moving before the US Federal Reserve (Fed), which only started lowering interest rates last month.
Remolona had flagged the move as early as May, which resulted in the peso falling against the dollar, but the BSP still pushed through with what it has called a "data-driven approach" to setting monetary policy.
The August cut, he noted, "came amid a favorable inflation outlook."
While consumer price growth had again breached target just a month before, the government had also ordered a sizable lowering of the rice import tariff, which has had "a considerable impact on overall inflation."
Remolona also noted that the market reaction to having acted earlier than the Fed was "relatively muted," with the peso only weakening slightly immediately after and since gaining against the dollar.
The US central bank outdid the BSP, however, by announcing a jumbo 50 bps cut, which has prompted Remolona to change his mind about just one more 25 bps reduction this year to two instead.
A one-time 50 bps cut, he said last month, will only be an option if the economy appears headed for a hard landing.
Most analysts are also penciling two more rate cuts this year on October 16 and December 19.
"On the domestic interest rate path, the current macroeconomic outlook, including target-consistent inflation, supports a calibrated shift to a less restrictive monetary policy stance," Remolona told Global Finance.
"However, the BSP will continue to monitor lingering upside risks to prices, including those coming from higher electricity rates and external factors," he added.
Remolona said that growth would likely settle within the government's target "as a whole," supported by "robust construction spending and the timely implementation of various government programs."
Economic managers cut the 2024 gross domestic product (GDP) growth goal to 6.0 to 7.0 percent in April, citing global trade disruptions and geopolitical tensions, and affirmed this in June.
With the inflation outlook having improved, Budget Secretary Amenah Pangandaman this week said that target could be revised.
GDP growth was 6.0 percent as of the first half and economic managers have expressed confidence of a within-target full-year result.
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