BSP has leeway to keep interest rates stable

By means of Luisa Maria Jacinta C. Jocson, News reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) still has room to extend its policy pauseFInflation is expected to have risen further in the past month, topping outFcially said.

BSP Governor Eli M. Remolona, ​​Jr. told reporters on Monday that the central bank has “wiggle room” to keep its benchmark interest rate stable at its meeting this month.

He said the central bank had already considered a possible rebound in AprilFlat.

“That has already been taken into account. We know it’s going to be a little high because of base eFfects. If it is too high, it will delay our easing,” he said in mixed English and Filipino.

a Business a poll of 16 analysts last week yielded an average estimate of 4.1% for AprilFlat. This would exceed the 2-4% target for the EU Ffirst time since 4.1% in November 2023 and would be faster than 3.7% in March but slower than 6.6% a year ago.

The BSP expects inflation to reach 3.5-4.3% this month. The consumer price index figures for April will be announced on May 7.

The central bank chief said they are still leaning towards hawkishness amid the higher economiesFlat.

“Inflation is hovering around 3.9%, so that is risky,” Mr Remolona said. “Inflation should be around 3%. That 3.9% easily drops to 4.1%, so we are still aggressive.”

The BSP could start cutting interest rates if it succeedsFInflation could ease to around 3% and remain in that range for several months, he said.

“If we ease rates, it would only be 25 basis points (bps). If it is more than 25 basis points, there is a recession or a hard landing. At this point we don’t see it coming.”

The Monetary Board will review the policy on May 16. The BSP kept its policy rate at a 17-year high of 6.5% for the fourth consecutive meeting in April.

The central bank raised borrowing costs by 450 basis points between May 2022 and October 2023 to tame red-hot interest rates.Flat.

ANZ Research said in a report that it does not expect the BSP to make rate cuts this year.

“The story in the Philippines is somewhat diFferent in thatFThe lation runs close to the upper limit of the offcial target due to higher rice and energy prices, both of which are imported,” the report said.

“Continued currency weakness due to monetary easing will now potentially drive up the land costs of these imports,” it added.

Mr Remolona said earlier that if he is inFAs risks persist, policy easing may be delayed until the end of 2011 Ffirst quarter of 2025.

PESO INTERVENTION
Meanwhile, Mr Remolona said the BSP only needed to intervene in the foreign exchange market in “small amounts” amid the peso’s recent weakness.

“We were operating in small quantities, not to influence value, but to keep the markets orderly,” he said.

After hitting a 17-month low against the dollar over the past two weeks, the peso has begun to stabilize and closed Monday at P57.22 against the greenback, appreciating 12.5 centavos against of its P57,345. Ffinish on Friday.

Year to date, the peso has fallen by P1.85 from its closing rate of P55.37 per dollar at the end of 2023.

The BSP chief added that he is not too concerned about the recent depreciation of the peso.

“There is not much stress yet in the movements of the peso. We would like to intervene, SigniFEspecially when there is stress,” Mr Remolona said.

“We know it is a strong dollar because many other currencies have also weakened. It is not a very strong case for intervention,” he added.

In October 2022, the peso reached a low of P59 against the dollar. This addedFunder pressure and prompted the BSP to intervene in the foreign exchange market and raise interest rates.