BSP’s shifting perspective: Will we see three rate cuts in 2024? 

It appears that the Bangko Sentral ng Pilipinas (BSP) is gearing up for a U-turn, with the once-cautious central bank now poised to slash interest rates three times in 2024, starting as early as August.

This is reflected in our updated views on the BSP’s projected easing cycle. The previous guidance from BSP Governor Eli Remolona Jr. was only a modest rate reduction, possibly even starting as late as the 1st quarter of 2025.

Remolona’s sense of urgency

The clear pivot in tone and urgency points to the BSP looking to quickly dial back its most recent tightening carried out in October 2023, given that the inflation outlook has improved significantly.

Back then, the BSP justified the off-cycle hike after they unveiled their “risk-adjusted” inflation forecast of 4.7%. The current forecast now has 2024 inflation settling at a much lower rate of 3.1%, opening the door for the BSP to ease, and ease in a big way.

Give GDP a lift with 3 cuts

Remolona has all but telegraphed a rate reversal in August, even ahead of the US Fed, once again highlighting the sense of urgency to shift to easing. Should the inflation outlook stay benign (BSP expects inflation at 3.1% in 2025), we believe the BSP should have ample space to give GDP growth a lift.

We currently expect the BSP to cut rates at each of their remaining meetings (and three more in 2025) as long as the inflation outlook points to inflation staying within target this year and the next.

These rate cuts are expected to achieve just the right impetus to exceed growth targets.

NICHOLAS MAPA is Metrobank’s Chief Economist, Market Strategist, and Head of the Research and Market Strategy Department in the Financial Markets Sector. He graduated from the University of Asia and the Pacific (UA&P) with an undergraduate degree in Humanities and a Master of Science (MSc) in Industrial Economics. He also completed an MA in Economics from Vanderbilt University and an MBA from the Kelley School of Business at Indiana University. He travels regularly with his family, enamored by culture and history. An avid learner, he also reads extensively.