By Chloe Mari A. Hufana, Reporter
APRIL INFLATION expected to fall beneath 2% provides the Philippine central bank with “ample policy room,” while first-quarter growth that may approach or dip below the government’s 6-8% objective will be a significant consideration in the Monetary Board’s policy assembly next month, as indicated by its governor.
“I believe it would be a favorable figure,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. communicated to reporters at the presidential palace on Monday, referring to last month’s inflation. “It offers us considerable policy flexibility. It simplifies our situation.”
Inflation is anticipated to have settled between 1.3% and 2.1% last month, based on BSP estimates released last week, allowing room for further reductions in benchmark interest rates.
A BusinessWorld survey of 14 analysts conducted last week produced a median prediction of 1.8% for the consumer price index (CPI) in April, consistent with the March figure.
The Philippine Statistics Authority will unveil the April inflation data on Tuesday (May 6), and preliminary first-quarter GDP figures on Thursday (May 8).
Gross domestic product (GDP) growth potentially falling below the full-year target of 6-8% also exerts pressure on the BSP to relax monetary policy and encourage growth.
“Growth will be a crucial consideration [when we decide in June],” Mr. Remolona remarked.
The BSP’s upcoming policy meeting is scheduled for June 19.
In April, the Monetary Board resumed its rate reduction cycle with a 25-basis-point (bp) cut, adjusting the key rate to 5.75%. It has decreased rates by a total of 75 bps in 2024.
Philippine GDP is expected to have grown by 5.8% in the first quarter, according to a median forecast from 15 economists and analysts surveyed by BusinessWorld, an increase from the revised 5.3% in the fourth quarter of 2024.
However, this growth would be slightly slower than the 5.9% observed in the first quarter of 2024.
“Low inflation may signify better supply management, but could also indicate waning demand, which may adversely affect growth. Reducing rates can help stimulate demand as it lowers borrowing costs, facilitating credit growth,” stated Reinielle Matt M. Erece, an economist at Oikonomia Research and Advisory, Inc., in a Viber message.
Mr. Erece expressed understanding for the BSP’s “caution,” as heightened global uncertainty can influence inflation.
“Currently, the Fed is adopting a hawkish stance as they evaluate the consequences of tariffs. This might be an opportunity for the BSP to diverge from the Fed’s actions and formulate policy based on national needs.”
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort predicted inflation eased to 1.6% year on year in April. He anticipates an average inflation of 2.2% for the entire year, comfortably within the BSP’s 2%-4% target range.
With subdued inflation and a decelerating economic growth, he indicated the BSP is likely to continue reducing policy rates to bolster growth.
“Relatively mild inflation at 2% levels seems feasible for most of 2025, comfortably within and even at the lower end of the BSP’s inflation target of 2%-4%, potentially justifying/supporting future local rate reductions that could align with upcoming Fed rate cuts in 2025,” he observed.
Filomeno S. Sta. Ana III, cofounder and coordinator of Action for Economic Reforms, noted that Mr. Remolona’s remarks hint at further easing of monetary policy.
“Inflation is no longer a constraining factor,” he mentioned in a Viber chat. “Our concern should be the fiscal policy that promotes unproductive, inefficient, and corruption-prone government expenditures, exacerbated by the government’s rollback of tax reforms.”
Mr. Remolona had previously indicated forthcoming rate reductions this year as the benchmark remains “somewhat restrictive.” He suggested that any cuts would probably occur in “incremental steps” or in 25-bp increments.
