BSP likely to take cues from US Fed
February 10, 2024 | 12:00am
MANILA, Philippines — Ahead of the policy meeting next week, the Bangko Sentral ng Pilipinas (BSP) is likely to follow the steps of the US Federal Reserve as to when high borrowing costs can finally take a breather.
Finance Secretary Ralph Recto has dismissed the possibility of a rate hike anytime soon, especially as he is set for his first policy meeting as a member of the powerful Monetary Board.
“I don’t expect a future rate hike because inflation is going down and it seems that it’s going down globally also,” Recto told reporters late Thursday afternoon.
“But of course, there might be some adjustment upward, but I think our policy rates today are high enough,” he said.
The benchmark interest rate is still at a 16-year high of 6.50 percent.
The BSP is seen keeping rates steady on Feb. 15, which could mark the third straight pause for the central bank.
Recto said the continued downtrend in inflation would eventually give BSP the room to finally ease.
Inflation slid further to 2.8 percent in January, which was right smack at the lower end of the central bank’s assumption for the month.
“Assuming it continues to go down and within the range, then realistically, the next step would be to lower the interest rates,” Recto said.
Nonetheless, the finance chief admitted that much of BSP’s policy decisions would still be significantly impacted by the way the Fed moves.
“The key is what happens with the Fed. Are they going to start reducing rates? If they do, then possibly we can start reducing rates,” Recto said.
“I think the Fed should cut first, then we take a look at our own data. We live in a global world, we are affected by what the Fed does as well,” he said.
In its recent meeting, the Fed kept rates unchanged and insisted that it wants “more confidence” before it starts easing.
As such, the Fed ruled out any monetary policy easing once it meets again in March.
Similarly, the BSP already said it is still necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes evident.
The BSP still sees inflation risks tilted to the upside on the back of higher food, transport and oil costs, increased electricity rates and the impact of El Niño.