By means of Luisa Maria Jacinta C. Jocson, Reporter
The Bangko Sentral NG Pilipinas (BSP) could already resume its relaxation cycle in its next meeting on 10 April, its top ofFsaid iCial.
BSP -Governor Eli M. Remolona, Jr. said that a rate reduction is still “on the table” during the meeting of the monetary council next month, which indicates “a few more” rate reductions for the rest of the year.
“Let me say that we still see ourselves on the relaxation cycle. We expect to cut a few more times this year. But how much, we didn’t record, “he said on a forum.
Mr Remolona also confirmed that the next meeting of the monetary board would be moved to April 10 from 3 April.
“If we think we are on the right track, more or less on the right track, we stay in baby steps, which means 25 basic points (BPS) at the same time,” he said.
The central bank unexpectedly kept the rates stable in its policy assessment in February and chose to keep the benchmark at 5.75%.
This after it had yielded three straight 25-BP cuts during each of his meetings in August, October and December.
“If things look much worse than we thought – that is what we call a hard landing – it can be up to 50 bps of a cut, even more, but as long as we are more or less on the rails, it will be 25 BPS at the same time,” said Mr. Remolona.
However, a hard landing or a recessions scenario is “very unlikely,” he added.
The Filipino economy grew with a slower than expected 5.2% in the fourth quarter, which yielded 2024 growth to 5.6%. The growth of the whole year Was far below the goal of 6-6.5%.
This year the government focuses on 6-8% growth.
Mr Remolona said that the central bank is considering different scenarios in her policy decisions.
“There is the basic scenario, which says a bit that we will cut through many times for the rest of the year. Then we have a Haviks scenario, which means less cuts. And then there is the Dovish scenario, which means more cuts than the baseline, “he said.
“We compare those three scenarios and how we see inflation evolving, how we see growth evolving. It is a balancing act between inflation and growth and so we have to weigh the various factors. “
The BSP chef also noted that they are still reworking the current models to take risks into account.
During their meeting in February, Mr. Remolona said that “Global Trade uncertainties” were the main reason behind the policy possession.
“There are still many figures to look at. Of course we calibrate our models again to take into account uncertainty, “he said.
Inflation of the headline decreased sharply in February to 2.1% of 2.9% in January and 3.4% a year ago.
The February print was also below 2.2% -3% prediction of the central bank.
“We missed the inflation number on the low side, lower than the bottom of our range. If we miss it, that’s the way to miss it, right? So we are happy with that lady, “said Mr. Remolona.
“Then we will look at all other songs, and then we will decide on 10 April whether we should be completed or not to relieve.”
Further RRR cuts?
Mr Remolona also mentioned the possibility of another reserve requirement ratio (RRR) gear, possibly within the year.
Asked if the BSP could again lower the reserve requirements before the year ends, he said that this was “possible.”
“For me, 5% is still high. But I am only one voice. We are seven on the monetary board. But it can’t be suddenly because we have to arrange the liquidity that comes out, “he added.
The RRR of universal and commercial banks and non-bank financial institutions with quasi-banking functions will be reduced from 7% to 5% later this month.
The RRR of digital banks will also be reduced by 150 BP to 2.5%, while the ratio for savings shooters will be reduced by 100 bps to 0%.
The RRR of national and cooperative banks is zero since October, the last time the BSP -Reserve requirements.
The RRR of large banks can eventually be brought to zero, Mr Remolona said. “It can be zero. In the US is the RRR zero. ‘
The BSP chef said there is a “subtle difference” between the policy percentage and the reserve requirement. Reducing one of the two stimulates the economy, he said.
“But the policy percentage, there is a kind of cycle, you don’t want to lower it and pick it up next time. You just want to continue in baby steps. “
“The reserve requirement, you can just stop. You lower it, it is, and then there is no kind of cycle that you have to worry about. The markets are disturbed when you change the cycle, especially with the policy percentage. “
Eye on peso
In the meantime, Mr Remolona said that they are closely monitoring the movements of the peso.
“We are always worried about the exchange rate. But not for the reasons why other people are worried about the exchange rate. We are worried about the exchange rate, because if it moves too much, especially if it weakens, it can be inflationary. “
The Peso closed on Tuesday on P57.225 per dollar, reinforced by 18.5 centavos of its P57.41 finish on Monday.
The peso was under pressure at the end of last year and fell three times to the record-run P59-per-Dollar level.
“We follow the exchange rate. But not because we want the peso to stay low or stay high. We follow it because of the possible inflation -consequently, “he added.
Mr Remolona also clarified how the central bank manages its gold reserves.
“Gold as an active is a very bad investment. The return is negative because it has guardian costs. Our gold is in the Bank of England, we pay there so that they can store our gold. That is where the market is, “he said in mixed English and Filipin.
“But it’s very volatile. So in itself it is a very bad investment. It is risky and the average return is negative. “
The last BSP data showed that the value of the Golden Interests of the Central Bank increased by 2.5% to $ 12.5 billion at final februari of $ 11.75 billion a month ago. It also jumped with 16.6% of $ 10.34 billion in the same period in 2024.
“But if you keep it as part of a large portfolio, and our portfolio is mainly dollar assets, it is a good hedge … Especially when there are geopolitics (uncertainties),” he said.
Mr Remolona said that the central bank sold gold reserves as the prices of the precious metal increased, so the gold in the BSP reserves broken the “ideal ratio between 8% and 10%.”
Most gold reserves of the BSP are in the Bank of England, with a small amount that is stored by the New York Federal Reserve.