UNCHANGED POLICY RATES. BSP Governor Eli Remolona Jr. on Wednesday (Dec. 20, 2023) said the central bank will likely hold policy rates steady in the next few months. Remolona said the BSP expects headline inflation to settle at 6.0 percent in 2023. (PNA file photo)
MANILA – The Bangko Sentral ng Pilipinas (BSP) is unlikely to cut policy rates in the next few months as it remains watchful on possible supply shocks, BSP Governor Eli Remolona Jr. said.
"I think we’re unlikely to cut rates in the next few months. We’re in a higher (rate) for longer, when I say hawkish, that basically means high for a while," Remolona said in a briefing on Wednesday.
“We’re still not yet out of the woods when it comes to inflation. If there are further supply shocks, it makes it all the harder," he said.
The Monetary Board of the BSP hiked policy rates by a total of 450 basis points since May last year to tame the elevated inflation. This brought the benchmark policy rate to 6.5 percent.
Headline inflation already eased to 4.1 percent in November this year, just slightly above the BSP's 2 to 4 percent target range.
The BSP, however, kept policy rates unchanged in its last two meetings.
Remolona expects headline inflation to settle at below 3 percent in the first quarter of 2024 and accelerate to over 3 percent in April to July due to the effects of El Niño.
"But for the year as a whole, we hope we're within the target range. Closer to the ceiling, I think. Closer to the ceiling and to the middle. Closer to 4 percent than 3 percent, for the year as a whole," he said.
Remolona said that if inflation continues on its easing path and the expectation's well-anchored, the BSP may start to consider easing policy rates.
Sought to further comment on what would warrant an easing, Remolona said, "if most of the numbers point in the right direction, including expectations, they really settle into this comfortable range of 3 percent for inflation, then we would consider cutting rates."
El Niño
The BSP earlier disclosed that the latest risk-adjusted inflation forecast for 2023 has been reduced to 6 percent from the previous 6.1 percent.
For 2024, it was also lowered to 4.2 percent from 4.4 percent.
"We included the possibility of a strong [El Niño] episode extending to the second quarter. So that's part of the risk-adjusting forecast," BSP department of economic research officer-in-charge Dennis Lapid said.
"In terms of the El Niño impact, we usually model it as an impact through food prices and also energy or power rates. So those are the main challenges that we're incorporating into the forecast," he added. (PNA)
