BSP rate cuts unlikely this year – ANZ

THERE IS NO ROOM for the The Bangko Sentral ng Pilipinas (BSP) will cut interest rates this yearFThis could still potentially exceed the target, ANZ Research said.

“Interest rate cuts in Indonesia and the Philippines are also not on the table this yearFAlthough the formation is retreating, it is still close to the upper limit of the offofficial target range of 2-4%,” the report said in its quarterly report.

ANZ Research said inflation in Asia’s developing countries has “decelerated significantly”, especially in the Philippines, where inflation has been “in the offofficial target range despite high food prices.”

“The numbers are still not low enough to allow rate cuts, but they have allowed the BSP to tone down its aggressive stance,” the report said.

InFInflation accelerated for the fourth month in a row from 3.8% in April to 3.9% in May. It could potentially exceed the 2-4% target until July, the BSP said earlier.

The Monetary Board will meet on Thursday for a policy review. All fifteen interviewed analysts in one Business Opinion polls last week expected the central bank to keep interest rates unchanged at a 17-year high of 6.5% for the sixth time in a row.

BSP Governor Eli M. Remolona, Jr. has indicated that policy easing could begin as early as August.

However, ANZ said it expects the BSP to start easing with a 50 basis point (bp) rate cut in March next year.

For the remainder of 2025, there are rate cuts of 50 basis points in June, 25 basis points in September and a further 25 basis points in December to end the year with a reference rate of 5%.

ANZ also expects the policy rate to remain at 5% until June 2026.

Meanwhile, DBS Bank Ltd. said. in a separate report that it expects the BSP to “keep interest rates on an extended pause” this year.

“We expect the Philippine central bank to keep benchmark interest rates at a 17-year high of 6.5% this week, with restrictive plans to keep rates in check.Fcontrol and support the currency,” the report said.

DBS said it expects the first rate cut of 25 basis points to come in the first quarter of 2025, followed by a 25 basis point cut in the second quarter and a further 25 basis points in the third quarter. This would bring the policy rate to 5.75% at the end of 2025.

It noted recent comments by Treasury Secretary Ralph G. Recto, who said the BSP would support the interestimated interest rates after the Federal Reserve.

On the other hand, Mr Remolona has said that they do not need to mirror the Fed and can cut the US central bank.

Meanwhile AZ raised the Philippine GDP growth forecast to 5.9% this year from 5.7% in the March report. This would be slightly lower than the government target of 6-7%.

The research firm noted that household consumption in the region is moderating.

“In the Philippines, the slowdown in private consumption is more real, driven by weaker purchasing power. We view this slowdown positively as it should decrease in the futureFand pressure on current accounts,” the report said.

Household consumption typically accounts for three-quarters of Philippine GDP. In the fourth quarter, interest rates rose 4.6%, the slowest since 4.8% decline in the first quarter of 2021.

For 2025, ANZ also raised its Philippine growth forecast to 6.1% from 5.9%. This is also below the government’s target of 6.5-7.5%.

The economy grew by 5.7% in the United States Ffirst quarter. To meet the lower end of the 6-7% target, GDP would need to average 6.1% in the coming quarters, the National Economic and Development Authority said. — Luisa Maria Jacinta C. Jocson