THE BANGKO SENTRAL ng Pilipinas (BSP) is anticipated to resume its rate-cutting cycle as early as April following slower-than-expected inflation in February, analysts said.
In a report, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the “door is now wide open for the BSP to resume easing in April.”
“Given the low inflation environment, we see a possible policy rate cut at the following Monetary Board meeting in April,” Metropolitan Bank & Trust Co. (Metrobank) Research said.
Headline inflation sharply eased to 2.1% in February from 2.9% in January and three.4% a 12 months ago. This also marked the slowest inflation print in five months.
This brought average inflation to 2.5% in the primary two months, well inside the central bank’s 2-4% goal.
Pantheon expects inflation to settle at 2.7% this 12 months as risks to the inflation outlook are tilted to the downside.
Nomura Global Markets Research analysts Euben Paracuelles and Nabila Amani likewise expect inflation to average 2.7% this 12 months.
However, Metrobank’s full-year inflation forecast is at 3.1% “barring major supply-side shocks.”
The central bank said the risks to the inflation outlook have turn into “broadly balanced” for this 12 months and the following. The BSP expects inflation to average 3.5% this 12 months.
Analysts said the within-target inflation outlook will allow the BSP to proceed easing.
Mr. Chanco said their baseline view calls for a rate cut on the Monetary Board’s April 3 meeting.
“Furthermore, we’re keeping to our view that the BSP will cut by a complete of 100 basis points (bps) by yearend to 4.75%, yet another 25-bp cut than the consensus currently expects,” he added.
Nomura expects a complete of 75 bps value of cuts this 12 months through the Monetary Board’s meetings in April, August and December.
“BSP still assesses the pass-through from weakening FX (foreign exchange) as limited and has ample FX reserves to intervene and stem currency volatility, and we predict it’s going to maintain a laissez-faire approach to FX policy,” it added.
Despite keeping the benchmark rate regular at 5.75% at its February policy review, BSP Governor Eli M. Remolona, Jr. has said they’re still in easing mode.
He signaled the opportunity of as much as 50 bps value of rate reductions this 12 months.
The central bank slashed borrowing costs by a complete of 75 bps last 12 months through increments of 25 bps at its last three meetings of the 12 months.
GlobalSource Partners country analyst Diwa Guinigundo said the lower February inflation can have a “material bearing on each the (BSP’s) baseline and risk-adjusted inflation forecasts for 2025 and 2026 unless a giant surprise counterweights that favorable factor.”
“Anchored on this, and assuming that the balance of risks starts to twist towards the midpoint, or the downside, the BSP could also be expected to resume easing its monetary policy stance.”
Nevertheless, Mr. Guinigundo said “some precaution is critical.”
“We cannot dismiss the brewing price pressures within the US consequently of the Trumpian higher tariff (costlier imports), tax cuts (more spending) and strict immigration policies (higher labor costs). They’re all potentially inflationary.”
Reuters reported one other reprieve of levies aimed toward Mexico and Canada announced by President Donald J. Trump on Thursday offered little relief to whiplashed markets.
The exemption expires on April 2 when Mr. Trump said he’ll impose reciprocal tariffs on all US trading partners.
“The US Fed would then be more careful in its easing stance such that if the BSP exercises its flexibility to ease monetary policy no less than twice in the course of the 12 months, any reduction in rate of interest differential with the US could trigger capital flows and weakness within the peso,” Mr. Guinigundo said.
Fed Chair Jerome H. Powell said on Friday the US central bank can be in no rush to chop rates while it waits for more clarity on how policies of the brand new Trump administration affect the economy.
Mr. Guinigundo said US inflation could “act up again” as global oil markets could also be disturbed.
“Indeed nobody wins in a trade war, and better though elusive inflation may very well be a silent proof,” he added. — Luisa Maria Jacinta C. Jocson
