Policy Rate Updates: BSP sees rate cuts in 4th quarter

The Bangko Sentral ng Pilipinas (BSP) maintained its target overnight reverse repurchase (RRP) rate at 6.50% for the fourth time at its second Monetary Board (MB) meeting this year.

The BSP also revised its risk-adjusted inflation forecast to 4.0% from 3.9% previously, given the risk of higher transport prices from recent oil supply disruptions globally, and the more salient, persistent uptrend in local rice inflation. Other factors contributing to the higher inflation outlook include the potential increase in nominal wages, with the recently passed PHP 100 wage hike in the Senate, and higher electricity prices.

We retain our baseline forecast on the timing of the BSP’s easing cycle, which will likely begin in the second half of the year. However, given the BSP’s latest guidance on the timeline of cuts, which may likely start in the fourth quarter of 2024, a re-evaluation of our policy cut estimates may be necessary in the near term.