Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. expressed concern about the potential challenges from US President-elect Donald Trump’ policies that could impact the Philippine economy.
“We’re in good shape, and we’re better prepared to face the challenges ahead of us,” Remolona said in a speech at a Rotary Club membership meeting.
“The challenges I would say have to do with the uncertainty about what Mr. Trump may do. He has threatened tariffs, he has threatened to deport millions of people from the United States. There is likely to be some retaliation with the tariffs. There is likely to be a significant impact on the labor force in the United States and it will also affect our own economy,” he said.
Remolona said the Philippines is in better shape than many other countries because the big chunk of its trade comes from business process outsourcing (BPO) and remittances.
“Hopefully, our services trade will remain intact, but there is some concern about what will happen to our goods trade,” he said.
“In fact, the Fed itself, the FOMC itself has all of a sudden become more cautious than before. The market now expects, whereas in the past the market was expecting the Fed to reduce interest rates by about 100 basis points over 2025, and now the expectation is between 25 and 50 basis points,” Remolona said.
Remolona said the expectation is that the Fed would cut its rates after the middle of the year.
“We don’t decide on monetary policy just on what the Fed does. We look at our own data and what the Fed does is just another piece of data. It goes into our analysis, it goes into our models, and we decide on monetary policy based on that,” he said.
BMI, a Fitch Solutions company said the Monetary Board of BSP is likely to cut interest rate by an additional quarter-point at its next meeting in February.
“The BSP is still on track to deliver another 25bps cut at its next meeting. But broadly speaking we think that the pace of easing will slow against the backdrop of a more hawkish Fed,” BMI said.
The Monetary Board is scheduled to hold its first meeting for the year on Feb. 20.
“To be clear, we think that the BSP will frontload interest rate cuts to support the economy. But its hands are tied when it comes to the extent of its loosening cycle,” it said.