By Luisa Maria Jacinta C. Jocson, Correspondent
CEBU — The Philippine central bank’s relaxation process is still ongoing although it may choose to maintain rates stable at its December gathering, its leading official indicated.
“We’re still in the relaxation phase. Either we decrease in December, or we will reduce in the subsequent meeting, but progressively,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. informed journalists on the sidelines of the BSP-International Monetary Fund (IMF) Systemic Risk Dialogue in Mactan, Cebu on Tuesday.
In response to a question about whether the central bank might keep interest rates stable at its December meeting, Mr. Remolona expressed in a blend of English and Filipino: “Yes, definitely. It depends on the information. We are still uncertain about December.”
Mr. Remolona emphasized that the central bank will persist in making rate reductions in 25-basis-point (bp) increments.
He previously stated that the BSP may not necessarily lower rates at each quarter or every meeting.
Since initiating its easing cycle in August, the BSP has decreased borrowing expenses by a total of 50 bps to date.
The Monetary Board has enacted a 25-bp reduction in its sessions in August and October, lowering the benchmark to 6%.
Mr. Remolona had previously indicated the potential for a 25-bp reduction on Dec. 19, the Monetary Board’s final policy conference this year.
Meanwhile, he remarked that the sluggish gross domestic product (GDP) growth in the third quarter was likely an “irregularity” and that growth is expected to rebound in the fourth quarter.
The Philippine economy expanded by a disappointing 5.2% in the third quarter, marking its slowest increase in five quarters.
This brought GDP growth for the nine-month period to 5.8%. The economy needs to expand by at least 6.5% in the fourth quarter to ensure it meets the lower end of the government’s 6-7% full-year goal.
Instead, the central bank is closely observing the latest inflation statistics, Mr. Remolona stated.
“The next figure to anticipate is the November inflation figure, we’ll wait to see what it is. Our expectation is that it will remain within the target range.”
Headline inflation increased to 2.3% in October, bringing the 10-month average to 3.3%. This was still within the BSP’s 2-4% target spectrum.
For 2025, the BSP head mentioned that the Monetary Board is likely to implement rate reductions in the 100-bp range.
“That’s not definitive. It might be more, might be less, but that’s in the vicinity,” he added.
PESO PERFORMANCE
Meanwhile, the BSP governor indicated he is not concerned about the peso’s recent performance.
“It’s below P59. We don’t stress much about whether the peso depreciates or appreciates. We focus on the pass-through effect. Right now, it’s still manageable,” Mr. Remolona remarked.
The peso concluded at P58.81 per dollar on Tuesday, depreciating by 13 centavos from its P58.68 close on Monday, according to data from the Bankers Association of the Philippines.
Markets are watching closely to see if the peso will drop to the P59-per-dollar mark. The peso reached a record low of P59 per dollar in October 2022.
However, he indicated that the central bank has been intervening with “small amounts.” “Just a little bit to prevent it from (depreciating significantly against the dollar),” he stated.
“We trust the individuals in the financial markets sector, but if it depreciates very significantly, then we engage in discussion. If it’s not too extreme, it doesn’t become inflationary. It turns inflationary if it’s sharp and ongoing.”
He noted that the recent peso weakness was anticipated following Donald J. Trump’s election as U.S. president. The U.S. dollar has been increasing amidst market expectations that Mr. Trump would apply higher tariffs, potentially driving inflation and hindering the Federal Reserve’s intended rate reductions.
“We observe the fluctuations that occur over a few months, not daily. It is generally expected that news like this will exert pressure on the peso the night before.”
