Finance Secretary Ralph Recto expects the Bangko Sentral ng Pilipinas (BSP) to keep the interest rates steady for its fourth consecutive policy meeting since October 2023.
“I don’t expect interest rates to go up or go down. I might be wrong, but I don’t expect that,” said Recto, who is also a member of the BSP’s policy-making Monetary Board.
The Monetary Board kept the overnight borrowing rate unchanged at 6.50 percent and the overnight deposit and lending facilities at 6.0 percent and 7.0 percent in its February meeting this year.
The board will hold its next meeting on April 8, 2024, which was rescheduled from April 4, 2024. The BSP said it moved the meeting because the MB wanted to wait for the release of the inflation data on April 5, 2024.
Recto said, however, the MB would likely cut policy rates by “possibly 50 basis points” later this year. “It might be two [25-basis-point adjustment] each. But it is the entire board that will decide,” he said.
BMI, a Fitch Solutions company, earlier said it was anticipating a 75-bps interest rate cut by the second half of 2024 in line with expectations of the US Federal Reserve’s adjustments.
Local monetary officials are watching the move by the Fed to keep the differential between US and Philippine interest rates steady to avoid fluctuations in foreign exchange rates.
Another major factor being considered by the BSP is the inflation rate which picked up to 3.4 percent in February from 2.8 percent in January this year.
The BSP said the latest risk-adjusted inflation forecast for 2024 eased to 3.9 percent from 4.2 percent in the previous meeting in December.
It said that for 2025, the risk-adjusted inflation forecast would be relatively steady at 3.5 percent. The BSP’s projection for 2024 and 2025 also fall within the government’s target range of 2 percent to 4 percent
Inflation averaged 6 percent in 2023, faster than 5.8 percent in 2022. It was also higher than the target range for the year, but within the Development Budget Coordination Committee (DBCC) assumption of 5 percent to 6 percent.