Philippines: Central Bank decides to decrease rates in October
Latest bank decision: At its meeting on 17 October, the Central Bank decided to reduce the Target Reverse Repurchase (RRP) Rate by 25 basis points to 6.00% with the overnight deposit and lending facilities rates adjusted to 5.50% and 6.50% respectively.
Monetary policy drivers: The Central Bank’s decision was influenced by the fact that inflation is currently within the target range of 2.0–4.0%. Moreover, the Bank expects inflation to remain within this target going forward, and it commented that market inflation expectations were well-anchored.
Policy outlook: The Central Bank stated it would maintain a measured approach in its easing cycle going forward. For our panelists, this is likely to translate into an additional rate cut at the Bank’s next meeting in December, followed by over 100 basis points of rate cuts in 2025.
Panelist insight: Giving her take on the outlook, ING analyst Deepali Bhargava said:
“We expect the BSP to continue to cut policy rates by another 25bp in December for the following reasons: 1. September CPI inflation hit a four-year low of 1.9%, with year-to-date CPI inflation well within the BSP target band of 2-4%. We expect CPI inflation to average 2.9%, well below the mid-point of the target band in 2024. The Philippines should benefit from improving global food supplies and lower rice prices following India’s lifting of its export ban on rice. 2. The real policy rate at 4%+ has hit a fresh high at a time when GDP growth is expected to remain below the government’s target of 6-7%.”