BSP widely expected to keep rates steady

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to keep rates unchanged in its next policy meeting, with the likelihood of huge rate cuts getting smaller and smaller.

Finance Secretary and Monetary Board member Ralph Recto is in line with the consensus that BSP will keep key interest rates steady for a fourth straight meeting next month.

“I don’t expect interest rates to go up or go down next week,” Recto told reporters.

Last month, the Monetary Board kept key policy rates unchanged at a near-17-year high of 6.5 percent as risks to the inflation outlook remain tilted toward the upside.

The Monetary Board will hold its next policy meeting on April 8.

Recto is anticipating that interest rates will be higher for longer as inflation remains elevated.

Nonetheless, the finance chief did not dismiss the possibility of a rate cut, although less than what was initially projected.

“This year, I’m guessing just 50 (basis points) rate cut,” Recto said.

“I think it would be for two meetings (in the second half),” he said.

The market is initially expecting up to four rate cuts this year for a total of 100 basis points.

“Both less in magnitude and frequency,” Recto said.

The BSP has emerged as the most aggressive central bank in the region after it raised interest rates by 450 basis points between May 2022 and October 2023 to tame inflation and stabilize the peso.

The expected rate cut by the BSP is seen leading to positive market movements including better corporate earnings and for the gross domestic product (GDP) to expand by at least six percent.

The private financial sector has been banking on policy easing to boost growth this year.

Apart from economic growth, the country’s investment climate also hinges on the normalization of policy rates in the Philippines and abroad.

Since the pandemic, the investment climate in the Philippines has been gloomy. This was exacerbated by the consecutive monetary policy tightening of central banks around the world in a bid to arrest inflation.