Newly-appointed Bangko Sentral ng Pilipinas Governor Eli Remolona said an interest rate reduction is possible within the year if inflation rate falls below 4 percent.
Remolona said the BSP’s Monetary Board might also consider an extended pause in interest rate adjustments, while it was reviewing all relevant data.
“We’re also looking forward to what we might do down the road. We’re not just looking at one policy rate. We’re looking at a path of the policy rate. It’s implicit in every decision we make,” he said during dinner with reporters at Manila Hotel Wednesday night.
Remolona said this would be one of the topics the MB would discuss in its next meeting.
He said an extended pause would help the BSP assess the extremely high interest rate level. The deceleration in inflation in recent months was “better than what we expected,” he said.
Inflation rate eased to a 13-month low of 5.4 percent in June from 6.1 percent in May. It was also the fifth month of deceleration this year since inflation peaked at 8.7 percent in January.
It slowed to 8.6 percent in February, 7.6 percent in March, 6.6 percent in April, 6.1 percent in May and 5.4 percent in June.
The June inflation rate was also within the BSP’s forecast range of 5.3 percent to 6.1 percent for the month.
Remolona, a seasoned international banker and a member of the policy-setting Monetary Board since August 2022, succeeded Felipe Medalla as BSP governor this month.
Remolona said he would continue the priorities that bore fruit under the leadership of Medalla, and even work harder to do better during his term. He considers Medalla a mentor and life-long friend.
“Together we must build on the progress we have already made. Inflation has finally started to come down as Gov. Philip explained. And if our models are right, we should be back in our target range even by the end of this year,” he said earlier.
Remolona assured that the Philippine banking system remained strong and their capital and liquidity were more than adequate.
“That’s why, in recovering from the pandemic, our banks have been a source of strength, unlike in previous crises, when they were a source of weakness. The plumbing of our system — our payments and settlement system — has increasingly become digitalized and efficient. We are delivering greater and greater access to financial services for our people,” he said.
Remolona previously served as an independent director of Bank of the Philippine Islands where he chaired its risk management committee.
He was also a professor of finance and director of central banking at the Asia School of Business in Kuala Lumpur.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the appointment of Remolona was a “welcome development for the markets and the economy.”