By means of Luisa Maria Jacinta C. Jocson, Reporter
The Bangko Sentral NG Pilipinas (BSP) is expected to cut Rates for a fourth consecutive meeting Thursday, analysts said, amidst inflation and weaker than expected gross domestic product (GDP).
A Business world Poll, which was performed last week, showed that 19 out of 20 analysts expect the monetary sign to reduce the target -force -return percentage with 25 basic points (BPS) on its policy assessment on 13 February.
If this is achieved, this would bring the benchmark percentage of the current 5.75% to 5.5%.
This would also mark the fourth consecutive meeting of the BSP reduction percentages, because it started his relaxation cycle in August.
In 2024, the central bank fell the loan costs with a total of 75 BPS.
On the other hand, an analyst expects that the central bank will keep the interest rates stable during the meeting.
“We expect the BSP to lower the policy percentage by 25 BPS to 5.5% during its monetary board meeting,” said Security Bank Corp. Vice president and research division Head of Angelo B. Taningco.
Pantheon Macro -economy Chef emerging Asia -economist Miguel Chanco said that the normalization of monetary policy is “far from over” is amidst rentet rates.
“I expect that the monetary board will cut further this week, with a further 25 bps, especially with the GDP of the fourth quarter in softer than expectations and with inflation firmly inside The goal range of the BSP, “he said.
Citi-economist for the Philippines Nalin Chutchotitham said that the BSP will probably deliver a 25-bp cut on Thursday after weaker than expected growth of 2024 and a moderate inflation view.
BSP -Governor Eli M. Remolona, Jr. Said earlier that a rate reduction is still “on the table” for this week.
“The central bank can use the slower than expected growth in the last quarter as the primary justification for the reduction, along with a stable inflation environment that enables the central bank to concentrate more on stimulating the economy,” Bank of the Filipino Islands (BPI (BPI (BPI (BPI (BPI (BPI (BPI (BPI) Chief Economist Emilio S. Neri, Jr. said.
Chinabank Research said that the price pressure has remained ‘generally mild and manageable’.
“Headline inflation remains stable at 2.9% in January, and Core inflation even relax, Will be an important input for the monetary council, “said Nomura Global Markets Research Analyst Euben Paracuelles.
The inflation of the head remained stable at 2.9% in January, within the 2-4% target band of the Central Bank.
HSBC economist for Asean Aris D. Dacanay said that inflation is “not so much a concern” if the latest consumer price index outcome was the clear objective.
Weak growth
In the meantime, analysts noted that the latest data from the economic output can cause further policy improvement.
“After reaching his inflation objective in 2024 in addition to a target-consistent inflation prospect this year, the BSP has room to shorten its policy rate after another disappointing BBP growth,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said.
Patrick M. Ella, economist at Sun Life Investment Management and Trust Corp. said that a weak GDP is for the time being a “more urgent issue”, so the BSP “must support growth on the monetary side.”
“The modest economic performance of the country for both the fourth quarter and the entire year 2024 also supports the matter for less limiting monetary policy to help achieve the goal of 6-8% of the government for this year,” said Chinabank.
GDP of the Philippines grew with a slower than non-softening 5.2% in the fourth quarter. This brought the growth from 2024 to 5.6% in 2024, short of the goal of 6.5% of the government.
“Softer GDP data for the second consecutive quarter and the slowest in 1.5 years or since the second quarter of 2023 would further support the lowering of local policy interest,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.
The BSP chef said earlier that the country is growing into a “little bit under capacity”. If the output gap gets larger, this would ask for more relaxation, Mr Remolona added.
“The continuing rate promotion of the BSP contributes to lower financing costs and doing business, while the seeds are sown for by investing -driven growth that can help create jobs and incomes,” said Mr Asuncion.
Mr. Dacanay said that the loosening of the monetary policy “will help to increase the demand for credit and to support growth.”
“This is an important market signal to stimulate business activity and expenditure after the disappointing GDP growth port for the last quarter of 2024,” said economist Reinielle Matt Ereece, “Oikonomia Advisory & Research, Inc ..
PESO
In the meantime, the recent appreciation of the PESO can also continue the BSP due to the relaxation cycle.
“The recent stability of the PESO can also offer the BSP more room to consider a rate reduction,” said Mr. Neri.
“The currency has been strengthened in recent trade sessions after the decision of the US government to postpone its rates against Canada and Mexico. Although a speed reduction can put the pressure on the peso, improving the market sentiment can reduce this. “
The Peso closed on P58.03 per dollar on Friday and strengthened with 15 centavos from its P58.18 finish on Thursday. This was the strongest closure in more than a month or since the P57.91 per dollar finish on January 2.
Week in week, the PESO also rose with 33.5 centavos from its P58,365 finish on January 31.
“Moreover, the BSP can also be open for a higher exchange rate, as long as inflation remains within the goal. A weaker peso can also benefit the economy by stimulating the purchasing power of exporters and OFW households, “Mr Neri added.
In the meantime, Mr Dacanay said that there is also room for the BSP to limit his interest difference with the American Federal Reserve.
“Currently, history has shown us at 125 BPS that the spread between the BSP and the upper reach of the FED rate can be as narrow as 100 BPS before financial jitters are stabbed,” he said.
Reuters reported that the Federal Reserve officials said on Friday that the American labor market is solid and noted that the lack of clarity about how President Donald J. Trump’s policy will influence economic growth and still established inflation, causing their no-rushed -Approach of interest rates is endorsed.
The FED kept its policy percentage stable last month, with reference to economic uncertainties.
“We think the BSP could still continue with a 25 BP reduction because the resulting interest rate difference, at 100 BPS, stays at a comfortable level and probably no significant depreciation of the PESO against the US dollar,” Chinabank Research added Toe.
On the other hand, Moody’s analysis and economist Sarah Tan said that the BSP could keep the rates on Thursday, and noted that it seems “too fast” to lower rates in the midst of trade wars.
“The BSP will be wise when monitoring worldwide developments that can re -blame inflation and weaken the strength of the peso,” she added.
Cautious
In the future, analysts said that the central bank will probably remain careful and could deliver less than expected tariff reductions this year.
“The BSP will probably retain its cautious reports, in view of persistent inflation risks and increased global uncertainties,” said Chinabank Research.
The Central Bank previously warned that the risks for inflation -forecasts for this year and 2026 will be tilted up.
“In 2025 we expect that the alleviation of monetary policy will only continue at a more moderate pace,” said Mrs. Tan.
Mr Remolona had the opportunity to cut this year with a total of 50 BPS, and said that 75 BPS or 100 BPS might be a bit “too much”.
“Although a rate reduction remains on the table, we believe that the size of alleviation will be limited this year,” said Mr. Neri.
“The considerable shortage of the economy makes it more vulnerable to external shocks such as global trade tensions. A narrower interest difference can also stimulate the outflows of portfolio, because investors are looking for a higher efficiency elsewhere, “he added.
This year, Mr Neri expects a total of 50 bps in tariff reductions.
“The preference of Mr Remolona for a reduction of Mr Remolona for a speed of 50 BP this year with the FED in Hold would be macro suitable, although this would be the price of a weaker peso,” said Mr Asuncion.
On the other hand, Mr. Ella expects that the central bank will deliver two tariff reductions a total of 50 BPS in the first half, keeping rates stable in the third quarter before they still deliver a 25-BP cut in the fourth quarter.