Metropolitan Bank & Trust Co.’s research unit expects the Bangko Sentral ng Pilipinas (BSP) to keep the interest rates steady until its October 2024 meeting, citing easing inflation data.
The Philippine Statistics Authority reported June inflation at 3.7 percent, within the BSP’s forecast range. The figure aligns with the Bangko Sentral ng Pilipinas’ forecast of inflation settling within a range of 3.4 percent to 4.2 percent for June.
“With year-to-date inflation at 3.5 percent, we maintain our forecast for an average of 3.3 percent to 3.6 percent in 2024, but now see a higher likelihood of settling closer to the lower end,” Metrobank Research said.
Despite lower inflation, Metrobank Research predicts the BSP will begin cutting interest rates by 25 basis points on Oct. 17, followed by another 25-bps in December to support the peso.
It said the possibility of an earlier policy change remains. Metrobank Research acknowledges a potential Aug. 15 action by the Monetary Board if July inflation continues to decline and the US Federal Reserve strengthens dovish signals on its own easing cycle.
The research unit anticipates rice tariff reductions to further slow inflation. While the Philippine Statistics Authority projects an impact by July, Metrobank Research estimates it would be more felt in August, potentially lowering rice prices by P7 to P9 per kilogram.
“We believe monthly inflation will likely peak in July and trend downward thereafter,” Metrobank Research said.