BSP Governor Remolona Says No Plans to Reduce Key Rate Just Yet
The head of the Bangko Sentral ng Pilipinas (BSP), Governor Eli M. Remolona Jr., announced on Friday that the Monetary Board does not plan to reduce the key rate despite three months of slowing inflation.
In an interview with CNBC Asia, Remolona stated that the data is not yet convincing enough to justify easing the interest rate. He also expressed comfort with the current peso-US dollar exchange rate, which has been hovering around the mid-P55 level.
The latest consumer price index (CPI) data shows that inflation is still above the target at 6.2 percent as of end-November, with the BSP expecting it to hit six percent by the end of the year.
Remolona emphasized that the trend for inflation appears positive, but more data is needed to determine if it will stay within target by 2024. He also mentioned the risk of further supply shocks that could influence expectations and lead to second-round affects.
Regarding the peso’s value, Remolona said he is “somewhat comfortable” at the current level and does not view gradual movements as a concern. The BSP recently held its target reverse repurchase (RRP) rate at 6.5 percent during its last Monetary Board policy meeting for 2023, signaling confidence in the previous adjustments made.
The BSP has revised its risk-adjusted full-year inflation forecast to six percent for 2023 and lowered the forecast for 2024 to 4.2 percent. Remolona explained that he prefers risk-adjusted forecasts because they take into consideration future events, unlike baseline estimates which are based on past events.
As of Friday, the peso closed stronger at P55.655, and the BSP remains focused on limiting spillover effects of external supply shocks. With a tightening bias, the central bank is closely monitoring economic data in making its policy decisions.
Overall, Remolona’s statements reflect a cautious approach to monetary policy in light of current economic conditions.
