BENGALURU :The Philippine central bank is expected to cut its key interest rate again on Thursday as slowing inflation allows it room to support the domestic economy amid weaker growth, a Reuters poll of economists found.
That marks a shift from the April survey when the majority of economists had expected the Bangko Sentral ng Pilipinas (BSP) to keep rates on hold in its June meeting.
Inflation slowed to 1.3 per cent in May, the weakest pace in over five years and below the BSP’s 2 per cent-4 per cent target range, while first-quarter growth missed expectations despite a surge in public spending.
In a June 10-17 Reuters poll, 22 out of 25 economists forecast that the BSP would lower its overnight borrowing rate by 25 basis points (bps) to 5.25 per cent on June 19. The rest expected rates to remain unchanged at 5.50 per cent.
“Progress on the inflation front opens the door for the BSP to consider another rate cut,” said Sarah Tan, an economist at Moody’s Analytics.
“Further, the recent stabilisation of the peso will provide an additional nudge to the decision-making process. Continued monetary easing would play a vital role in supporting the domestic economy amid a complex external environment,” Tan said.
Among those who provided longer-term views, 12 of 23 economists, or over 50 per cent, projected the benchmark rate would fall by another 25 bps to 5.00 per cent by the end of the third quarter. The rest forecast 5.25 per cent.
The median view was a cut of 50 bps to 5.00 per cent this year, though economists were divided on where rates would be by end-2025.
Governor Eli Remolona signalled in April that more rate cuts were likely. However, some polled economists said the BSP’s policy path may be complicated by the U.S. Federal Reserve, which is widely expected to keep rates on hold until September.
“While downside risks to both growth and inflation suggest more cuts are needed…the Federal Reserve’s path will likely play an equally important role in determining the magnitude of rate cuts by the BSP,” noted Shreya Sodhani, regional economist at Barclays.
“With our U.S. economists now looking for only one cut by the Federal Reserve this year, we think the BSP can ease only twice more while keeping its desired 100 bps differential between its policy rate and the fed funds rate,” Sodhani said.
(Other stories from the June Reuters global economic poll)
