Philippine Finance Secretary Ralph Recto has expressed his belief that interest rates are unlikely to rise in the near future, citing easing inflationary pressures. He further suggested the possibility of rate cuts in the latter half of the year, indicating a potential shift in monetary policy.
Recto emphasised that the current policy rates are sufficient, considering the downward trajectory of inflation. He anticipates that the Philippine central bank’s upcoming rate-setting meeting on February 15 will not result in further rate hikes, echoing sentiments shared by many economists who believe that the tightening cycle has reached its conclusion.
Annual inflation in January slowed to 2.8%, its lowest level in over three years, down from 3.9% in December. This marks the second consecutive month that inflation has remained within the central bank’s target range of 2.0% to 4.0%. The deceleration in price increases is expected to positively impact the consumption-driven economy.
However, Recto acknowledged the need to revise this year’s growth target of 6.5%-7.5% to a more realistic figure, although he did not provide specific numbers. The Philippine economy grew by 5.6% in 2023, falling short of the government’s growth target range of 6.0% to 7.0%.
The Bangko Sentral ng Pilipinas (BSP) has implemented a series of rate hikes totalling 450 basis points since May 2022 to combat inflation. Despite this, rates remained unchanged in the final two meetings of 2023.
Recto, who serves as the government’s representative to the BSP’s monetary board, suggested that the timing of potential rate cuts may be influenced by the actions of the U.S. Federal Reserve. He indicated that if the Fed initiates rate reductions, the BSP may follow suit.
The remarks from Recto underscore the delicate balance between inflation management and economic growth, highlighting the importance of closely monitoring global economic trends, particularly those emanating from the United States, in shaping Philippine monetary policy decisions.
Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.