Economist: BSP likely to maintain policy rates next week

MANILA – The Bangko Sentral ng Pilipinas' (BSP) Monetary Board will likely keep policy rates unchanged during its meeting next week, an economist said.

In a Viber message on Friday, Rizal Commercial Banking Corporation chief economist Michael Ricafort said the BSP will likely match the United States Fed's latest decision to maintain policy rates.

"The BSP would likely match any Fed rate cut/s later in 2024 and in 2025 to maintain healthy interest rate differentials (now at 100 basis points: 6.50% for the BSP policy rate and 5.50% for the Fed Funds Rate upper limit)," Ricafort said.

The Monetary Board has so far maintained policy rates for five consecutive meetings.

The BSP's target reverse repurchase rate was retained at 6.50 percent, while the interest rates on the overnight deposit and lending facilities will also remain at 6 percent and 7 percent, respectively.

The Monetary Board is scheduled to meet on June 27 to decide on key interest rates.

"Any local policy rate cut would also be a function of the inflation and also a function of the behavior of the U.S. dollar/peso exchange rate that has an effect on import prices and overall inflation," Ricafort said.

Headline inflation settled at 3.9 percent in May this year.

Ricafort said that if any Fed rate cut becomes imminent in September, the BSP could start to cut rates by August 2024.

"The BSP would likely match any possible Fed rate cut as early as the latter part of 2024 or 2025, especially if global crude oil prices continue to correct lower and would support the achievement of the inflation targets of the Fed and other global central banks, as a result of the higher-for-longer interest rate stance that effectively slowed down the global economy and the demand for oil despite challenges posed by geopolitical risks recently," he said. (PNA)