Remolona says BSP still in policy easing cycle

MACTAN, Cebu — Bangko Sentral ng Pilipinas (BSP) governor Eli Remolona Jr. on Tuesday said the central bank is still on its easing cycle, as he sees the slower economic growth in the third quarter as an aberration, and a recovery in the fourth quarter.

Speaking with reporters on the sidelines of the BSP-IMF Systemic Risk Dialogue, Remolona said a rate cut is still possible in the short term, with the next policy meeting of the Monetary Board scheduled on December 16, 2024, the last for the year.

“We’re still in the easing cycle, so either we cut in December, we’ll cut in the next meeting. Pero dahan-dahan lang,” he said, adding that adjustments to be made are expected to be in 25 basis points each.

The BSP delivered a 25-basis-point rate cut in October, bringing the target reverse repurchase rate (RRP) to 6.0%, the overnight deposit rate to 5.5%, and the overnight lending facility rate to 6.5%. It also delivered a 25-basis-point cut in the meeting prior in August.

Remolona’s remarks come as the Philippine economy expanded by 5.2% in the third quarter, the weakest in more than a year. This brought year-to-date growth at 5.8%, below the government’s full-year target of 6% to 7%.

“Parang aberration lang eh (It seems like just an aberration). Palagay ko nito babawi eh, babawi ng Q4 (I think we will recover, we will recover in the fourth quarter),” Remolona said.

The next key figure the central bank is looking out for is the November inflation print, which he said is expected to be within the 2% to 4% target band. Inflation clocked in at 2.3% in October.

For 2025, the BSP announced a ballpark figure of 100 basis points for easing in 2025, but he said this is not exact as it could be more or it could be less.

In the same interview, Remolona said the BSP is monitoring the movement of the Philippine peso against the US dollar, which has been trading at the P58:$1 level for all the trading days so far this month.

“We don’t worry so much about whether the peso depreciates. We worry about the pass-through effect, pero ngayon medyo okay pa naman (but for now, it’s still okay),” he said.

He also noted that while the central bank mostly lets the market move independently, it would intervene if needed.

“If it depreciates very sharply, then we talk. Kung hindi naman (If not) very sharply, it doesn’t become inflationary. It’s inflationary kung medyo (if it’s a bit) sharp at tsaka tuloy-tuloy (and continuous). Hindi kami nakikialam dun sa (we do not intervene on the) day to day movements,” he said. —KBK, GMA Integrated News