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Policy Rate Updates: US Fed and BSP: Clear Path for a Pivot?
The BSP will likely cut as much as the US Fed in 2024 and the RRP Target rate will likely fall below 6% by next year as inflation expectations come down, from the current 6.50% this year.
By Geraldine Wambangco and Patty Membrebe
Like the US Fed, the Bangko Sentral ng Pilipinas (BSP) maintained the benchmark interest rates at its current level of 6.50%, for a second meeting since its off-cycle policy rate hike in October.
The BSP Monetary Board remains firm on keeping the door open for further policy rate adjustments as domestic headline inflation is only expected to return to within target in 3Q 2024. In our view, however, the BSP has concluded its tightening cycle and will keep rates unchanged at 6.5% until the third quarter, followed by at least two cuts by end-2024.
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Policy Rate Updates (December 14, 2023)
We expect slower BSP rate cuts relative to the Fed over the medium term on the back of stickier domestic price pressures vs in the US.
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