BSP’s Remolona says rate cut on the table for Feb. 13 policy meeting
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BAGUIO CITY — Further policy easing is on the table for the policy meeting of the Monetary Board next month but this will rely on certain factors including the country’s latest macroeconomic factors, Bangko Sentral ng Pilipinas (BSP) governor Eli Remolona Jr. said.
According to Remolona, the Monetary Board will be looking at certain factors such as the recently released fourth-quarter and full-year economic growth figures, which were below the downward revised target range set by the administration’s team.
The Philippine economy expanded by 5.2% in the fourth quarter of 2024, bringing the full-year growth to 5.6%, below the 6.0% to 6.5% target range. This is the second straight year that the Philippines missed its target.
“We look at it relative to what we call the output gap. Is it widened? Because right now, we have kind of a negative output gap,” he told reporters.
The output gap is measured in terms of the country’s current level against its capacity. Remolona said having the country at capacity would be ideal, as being above capacity would be inflationary, and being below would be disinflationary.
“We’re growing at a little bit below capacity and whether that number widens, that gap, between our capacity and how much we’re really growing (will be a factor in the next meeting,” he said.
Another factor that the Monetary Board will consider is the upcoming inflation data, with the Philippine Statistics Authority (PSA) set to release January inflation figures next Wednesday, February 5, 2025.
The central bank projects inflation to settle within the 2.5% to 3.3% range, citing upward prices pressures on major food items, and higher water rates and sin taxes. These are expected to be partly offset by the lower prices of rice and electricity.
Remolona said the Monetary Board will also take the recent pause of the Federal Reserve into consideration when it makes its decision whether or not to adjust local policy rates.
“We look at what they did and we look at the reasons for doing that,” he said.
“Of course it affects what we will do, because it affects what happens to their economy, what happens to their inflation rate, so in that respect, it affects what we will do, but in effect we don’t copy them, we don’t follow them,” he added.
The next policy meeting of the Monetary Board, the first for the year, was moved to an earlier schedule of February 13, as Remolona is set to fly to Paris to attend the Financial Action Task Force Plenary Working Group Meetings from February 17 to February 20.
The Monetary Board lowered the monetary policy rates thrice in 2024, for a total reduction of 75 basis points — 25 basis points each in August, October, and December.—AOL, GMA Integrated News