BSP seen cutting rates by 100 bps

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to slash its policy rates by as much as 100 basis points this year as inflation continues to soften and return to the target band.

In a television interview with Bloomberg yesterday, Finance Secretary Benjamin Diokno said he expects the central bank to pencil in a rate cut of up to 100 basis points this year.

Diokno was the BSP governor during the Duterte administration and currently sits in the Monetary Board.

“The BSP is data-dependent and we observe what’s happening abroad, principally what’s happening at the Fed (US Federal Reserve),” Diokno said.

“So a 75-basis-point cut by the Fed this year could actually be matched by the central bank or even by 100 basis points,” he said.

The biggest market lead for 2024 is the continued expectation that the Fed will cut rates as early as March.

Diokno is also banking on the continued downtrend in inflation, which soared to six percent in 2023 amid more expensive food and oil prices.

Last year’s inflation print also breached the BSP’s two to four percent target for the second straight year.

The December 2023 inflation of 3.9 percent marked the first time that the headline rate settled within the target band since March 2022.

“Inflation might increase slightly in the second quarter because of base effects, but for the whole year of 2024 it would be within the target band of two to four percent, so that is good news,” Diokno said.

As of now, the benchmark interest rate is at 6.5 percent, the highest in 16 years.

“I see it at 5.5 percent by end-2024. The timing of course will be data dependent and probably toward the second semester of this year,” Diokno said.