By Katherine K. Chan
FINANCE SECRETARY Ralph G. Recto ruled out an “off-cycle” move on monetary policy easing despite weaker-than-expected third-quarter growth, but noted there’s a high probability of a rate cut on the central bank’s next meeting.
“I’m undecided about an ‘off-cycle’ cut, but there’s an excellent probability for a rate cut before the tip of the 12 months,” Mr. Recto told BusinessWorld on the sidelines of a Senate hearing on Thursday.
He said the Monetary Board is more more likely to cut the important thing policy rate by 25 basis points (bps) on the Dec. 11 meeting.
Asked if there’s a probability for a 50-bp cut, Mr. Recto said: “There’s at all times a probability. All of it depends upon what happens. But I believe there’s the next probability for a 25-bp cut.”
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Zeno Ronald R. Abenoja told BusinessWorld that they’ve not discussed any possible off-cycle monetary policy easing.
“I haven’t heard anything,” he said. “So, it’s probably just rumors. So far as I do know, there are not any discussions.”
In October, the BSP lowered borrowing costs by 25 bps to a three-year low of 4.75%. It has thus far reduced the important thing policy rate by 175 bps because it began its easing cycle in August last 12 months.
The slower-than-expected gross domestic product (GDP) growth within the third quarter and benign inflation give the BSP room for an additional rate cut in December.
The Philippine economy grew by 4% within the third quarter, the slowest growth seen in over 4 years or because the first quarter of 2021.
BSP Governor Eli M. Remolona, Jr. in October said they may cut rates by one other 25 bps on the Dec. 11 meeting and potentially more in 2026 to support the economy amid a slowdown resulting from the continuing flood control scandal.
Rizal Business Banking Corp. Chief Economist Michael L. Ricafort on Thursday said the third-quarter GDP data prompted speculation about an off-cycle rate of interest cut.
Mr. Ricafort said it’s “possible, but not 100% sure” for the BSP to chop rates before its scheduled meeting on Dec. 11.
“There have been rumors available in the market since (Wednesday) a couple of possible off-cycle monetary easing, particularly a cut in large banks’ RRR (reserve requirement ratio), after the softer local GDP growth data (on Nov. 7),” he said in a Viber message on Thursday.
“Every (one) percentage point cut in large banks’ RRR is comparable to about P180-billion additional liquidity infused into the banking system that would increase lending and other investments corresponding to fixed income or bonds, amongst others,” he added.
On Feb. 21, the BSP cut universal and industrial banks’ RRR by 200 bps to five%, which took effect within the week of March 28.
Meanwhile, Mr. Ricafort noted that the newest third-quarter GDP data have caused the yields on the PHP (Philippine peso) Bloomberg Valuation Service to say no barely and the peso to slump to a fresh low against the US dollar.
On Nov. 12, the peso fell to a brand new record low after closing at P59.17 versus the greenback, slipping by 18.5 centavos from its P58.985 finish on Tuesday.
The BSP chief earlier said they are going to not intervene within the foreign exchange market unless the peso’s depreciation leads to inflationary pressures.
“I believe the BSP intervenes simply to ensure that that the curve just isn’t too wide,” Mr. Recto said.
“But I’m sure everyone knows that the BSP, to a certain degree, intervenes available in the market simply to flatten the curve.”
He also noted that the peso won’t weaken further if each the BSP and the US Federal Reserve would cut in December.
“All of it depends upon what the Fed does,” Mr. Recto said. “If the Fed cuts rates also, then it might be the identical.”
Last month, the Fed delivered its second 25-bp cut this 12 months, bringing its rate of interest to the three.75-4% range. This brought its total cuts to 150 bps since September 2024.
Nonetheless, December easing by the Fed stays uncertain as policymakers weigh concerns over economic data after US President Donald J. Trump ended the longest US government shutdown last week.