Philippine central bank cuts rate for second time, further easing possible

By Neil Jerome Morales and Mikhail Flores

MANILA (Reuters) -The Philippine central bank reduced its key interest rate by 25 basis points on Wednesday for a second meeting, and left the door open to further cuts with medium-term inflation expected to stay within its 2%-4% target range.

The cut, which was unanimously predicted by all 23 economists in a Reuters poll, took the target reverse repurchase rate to 6%, the lowest since February 2023.

“The Monetary Board’s decision is based on its assessment that price pressures remain manageable,” Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona told a press conference.

Regionally, Thailand’s central bank unexpectedly cut its key interest rate on Wednesday to revive a sluggish economy with inflation below target, while the Bank of Indonesia kept rates unchanged as expected.

The Philippine peso was largely unchanged at 57.73 to the dollar after the BSP’s rate cut.

The BSP lowered its baseline inflation forecast for 2024 to 3.1% from 3.4%, but raised its projections for 2025 and 2026 to 3.2% and 3.4% from 3.1% and 3.2%, respectively, because of potential adjustments in electricity rates and wages.

Even so, Remolona said it was possible the BSP would enact a third quarter-point rate cut at its last meeting this year in December, and a cumulative 100 bps in cuts next year.

“We continue to update our calculations in the face of new data and for now at least the easing that we’ve been doing, and even the easing that we might do, we think that will still keep the inflation rate within the target range,” Remolona said.

“We prefer to take baby steps in terms of adjusting the policy rate, meaning 25 basis points at a time, but not necessarily every quarter or not necessarily every meeting,” Remolona said.