The Bangko Sentral ng Pilipinas (BSP) is expected to start reducing its benchmark interest rate by June 2024 on easing inflationary pressures, according to Metropolitan Bank & Trust Corp. (Metrobank).
“While our estimates show that headline inflation will remain above the BSP’s target band from the second quarter of 2024 onwards, we think that dissipating price pressures in other non-volatile commodity prices as indicated by the move lower in core inflation [from 4.7 percent in November to 4.4 percent in December], will make the case for the BSP to consider lowering rates as early as June,” Metrobank Research said in its latest report.
It released the report after the Philippine Statistics Authority said inflation in December fell to a 22-month low of 3.9 percent in December 2023. The full-year inflation also settled at 6.0 percent, above the target range of 2 percent to 4 percent.
Metrobank Research said it expects the average inflation to reach 4.3 percent in 2024, largely driven by the risk of upward pressure on rice prices.
“We think that policy rates may not need to be as restrictive as current levels throughout the year, especially if core inflation continues to move lower, as the average difference between the BSP policy rate and domestic headline inflation [from 2009-2023)]has been at 28 bps [basis points] vs. 260 bps currently,” the bank’s research unit said.
Rice exporting countries Thailand and Vietnam said dry spells and flash floods last year led to a forecasted fall in crops in 2024.
Rice inflation in the Philippines climbed to 19.6 percent in December from 15.8 percent in November. It was the highest since March 2009’s 22 percent.
