BSP rate cuts unlikely this year — ANZ

There is no room for the Bangko Sentral ng Pilipinas (BSP) to cut rates this year as inflation may still potentially breach the target, ANZ Research said.

“Rate cuts in Indonesia and the Philippines are also not on the table this year… In the Philippines, inflation though receding, is still running close to the upper bound of the official target range of 2-4%,” it said in its quarterly report.

ANZ Research said inflation in developing Asia has “eased considerably” especially in the Philippines, where inflation “has remained in the official target range despite elevated food prices.”

“The outturns are still not low enough to permit rate cuts, but even so they have allowed the BSP to dial down its hawkishness,” it added.

Inflation quickened for the fourth straight month to 3.9% in May from 3.8% in April. It may potentially breach the 2-4% goal until July, the BSP earlier said.

The Monetary Board is set to meet on Thursday for its policy review. All 15 analysts surveyed in a BusinessWorld poll last week expect the central bank to keep rates unchanged at a 17-year high of 6.5% for a sixth straight meeting.

BSP Governor Eli M. Remolona, Jr. has signaled that policy easing could begin as early as August.

However, ANZ said it expects the BSP to begin easing with a 50-basis-point (bp) rate cut in March next year.

For the rest of 2025, it sees rate cuts worth 50 bps in June, 25 bps in September and another 25 bps in December to end the year with the benchmark rate at 5%.

ANZ also expects the policy rate to stay at 5% through June 2026.

Meanwhile, DBS Bank Ltd. said in a separate report that it expects the BSP to “keep the rate on an extended pause” this year.

“We expect the Philippine central bank to keep the benchmark rate at a 17-year high of 6.5% this week, with restrictive plans to keep inflation in check as well as support the currency,” it said.

DBS said it expects the first rate cut of 25 bps to be delivered in the first quarter of 2025, followed by a 25-bp cut in the second quarter and another 25-bp cut in the third quarter. This would bring the key rate to 5.75% by end-2025.

It noted recent comments from Finance Secretary Ralph G. Recto, who said the BSP could only reduce interest rates after the Federal Reserve.

On the other hand, Mr. Remolona has said they do not need to mirror the Fed and could cut ahead of the US central bank.

Meanwhile, ANZ raised its Philippine GDP growth forecast to 5.9% this year from 5.7% in its report in March. This would be a tad lower than the 6-7% government target.

The research firm noted that household consumption is moderating in the region.

“In the Philippines, the slowdown in private consumption is more genuine, driven by weaker purchasing power. We view this slowdown positively as it should alleviate inflation and current account pressures,” it said.

Household consumption typically accounts for three-fourths of Philippine GDP. It rose by 4.6% in the fourth quarter, the slowest since the 4.8% decline in the first quarter of 2021.

For 2025, ANZ also hiked its Philippine growth forecast to 6.1% from 5.9%. This is also below the government’s 6.5-7.5% goal.

The economy grew by 5.7% in the first quarter. To meet the lower end of the 6-7% target, GDP would need to average 6.1% in the next quarters, according to the National Economic and Development Authority. — Luisa Maria Jacinta C. Jocson