In a recent interview, the Governor of the Bangko Sentral ng Pilipinas (BSP), Eli M. Remolona Jr., suggested that a policy rate cut could be on the horizon for 2024. He cited the moderating inflation outlook due to base effects as a potential factor for this decision.
Remolona also stated that if economic growth in 2023 exceeds expectations, the hawkish Monetary Board, BSP’s policy-making arm, may take the opposite approach and raise the current 6.5 percent benchmark rate even further. This would be after a cumulative 450 basis points (bps) adjustments since May 2022.
This statement aligns with Remolona’s consistent message to the market that BSP’s monetary policy stance will remain tight for the foreseeable future, as long as inflation is not firmly within the target range of two percent to four percent.
Speaking at the BSP’s 2024 Annual Reception for the Banking Community, Remolona suggested that a rate cut could happen within the year, but possibly not in the first semester. He noted that January’s inflation number is expected to be lower than December’s 3.9 percent and significantly lower than January 2023’s peak of 8.7 percent.
Remolona also mentioned that the latest estimate of a stronger 2023 GDP expansion might allow the Monetary Board to adjust the key rate higher, providing the GDP growth exceeds the government target of six percent to seven percent.
The news comes ahead of the upcoming release of the fourth quarter GDP and full-year 2023 GDP on January 31, as well as the January CPI announcement on February 6. The first Monetary Board policy meeting for this year is scheduled for February 15.
During his speech at Bankers’ Night, Remolona emphasized that the BSP aims to continue to be a stabilizing force for the economy. He outlined areas of focus, including enhancing the monetary policy framework, strengthening banking supervision, and deepening the capital markets.
The BSP governor underscored the importance of anchoring inflation expectations, ensuring a healthy banking system, and infusing sustainability initiatives with an inclusion perspective to support the most vulnerable segments of society.
