A Japanese bank expects the Bangko Sentral ng Pilipinas (BSP) to postpone its interest rate cuts later this year to support the value of the peso.
Ryota Abe, economist of global markets and treasury department at Asia Pacific Division of Sumitomo Mitsui Banking Corp. (SMBC) said while the BSP decided to maintain its policy rate at 6.50 percent Monday, the peso-dollar exchange rate continued to hover at 56.45 after the announcement.
“Looking forward, concerns for inflation have increased regarding BSP’s rate cuts,” Abe said.
“We had expected the Fed to cut its rate twice in 2024, but we have changed the view after the US jobs data released on April 5, which was stronger than expected. We now expect the Fed to reduce its rate only one time, and twice in 2025,” he said.
Abe said changes in the Fed’s rate cut forecast would have adverse impacts on the currency market. “Given the current changes, my view now is that BSP may postpone its timing to cut rates to the August meeting or in the later meetings. In this case, rates will be reduced by 75 to 50 basis points in total,” he said.
Abe said that in the short term, it is unlikely for the BSP to consider a rate cut as concerns for high inflation remain.
“Given the remark by the governor, it is in the August meeting that BSP can judge whether it should cut its rates with the latest information,” he said.