BSP Update: Giving a subtle nod to growth

The Bangko Sentral ng Pilipinas (BSP) eased policy rates further by a quarter point, narrowing the interest rate differential between the BSP and the Federal Reserve (Fed) to 50 basis points (bps).

Key points

• The BSP reduced its target Reverse Repurchase (RRP) rate by 25 bps to 4.25% in its February 19 meeting.
• BSP Governor Eli Remolona said while the BSP expects an uptick in inflation, consumer price increases remain “manageable,” and largely driven by temporary supply-side factors.
• The central bank chief noted that consumer and business sentiment shows “tentative signs of recovery,” which may be supported by the BSP’s decision to ease rates.

Moving forward

• Metrobank forecasts another 25-bp cut to the BSP’s key policy rate, possibly as early as its next rate-setting meeting.
• The USDPHP spot rate may tick higher, as the interest rate differential between the Fed and the BSP narrows to a modest 50 bps.
• Meanwhile, the yield curve could steepen further, with the BSP highlighting the upward adjustment to inflation forecasts.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)     

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