Finance Secretary Ralph Recto said Monday he expects the Bangko Sentral ng Pilipinas (BSP) to reduce the key interest rates by August 2024.
“That’s very much possible… it all depends on inflation outlook number one, and I suppose what the Fed does. The spread shouldn’t be too different between the US and the Philippines, otherwise you might have flight to safety,” Recto, a member of the BSP’s Monetary Board, said during the Philippine Economic Briefing in Pasay City.
“So it’s possible that you may have a rate cut this year, and possibly more rate cuts next year. Surely, I don’t expect interest rates to go any higher. If not, there’s time that it will start going down, maybe 150 bps in the next two years,” he said.
The Monetary Board kept the overnight borrowing rate steady at 6.5 percent for the fifth consecutive policy meeting since October 2023.
It also maintained the interest rates on overnight deposit and lending facilities at 6.0 percent and 7.0 percent, respectively.
The BSP had said the risks to the inflation outlook continued to lean toward the upside.
“Potential price pressures are linked mainly to higher transport charges, food prices, electricity rates and global oil prices,” the BSP said.
The BSP’s risk-adjusted inflation forecast for 2024 eased to 3.8 percent from 4 percent in the previous meeting.
Meanwhile, the risk-adjusted inflation forecast for 2025 rose to 3.7 percent from 3.5 percent previously. Inflation expectations remain well-anchored, it said.
Based on the latest gross domestic product (GDP) data, the expected path for domestic output growth over the medium term remains largely intact, even as recent indicators point to continued moderation under tight financial conditions, the BSP said.
The Philippine economy grew by 5.7 percent in the first quarter of 2024, slower than the government’s target of 6 percent to 7 percent for the year.