September 21, 2023

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Easing prices may spur BSP rate cuts

2 min read

By Keisha B. Ta-asan, Reporter

WASHINGTON, D.C. — The Philippine central bank may cut the key policy rate this year if inflation continues to ease in the next six months, according to its chief.

“We already have two very low month-on-month [inflation],” BSP Governor Felipe M. Medalla told reporters on the sidelines of an economic briefing in Washington D.C. on Wednesday evening (Manila time). “If that continues, then there’s a reason to pause.”

“If April has a similar pattern, then we have four more of that, five more of that, we can even talk about cuts,” he said. If inflation eases month on month by 0.2 point in the next six months, “why not?”

Inflation slowed for a second month to 7.6% in March from 8.6% in February, the slowest in six months. It averaged 8.3% in the first quarter, higher than the central bank’s full-year forecast of 6% and its 2-4% target.

“We will need more good data points for cuts,” Mr. Medalla said. “For a pause, just one more [month], because we already have two very good data points.”

The Monetary Board has raised borrowing costs by 425 bps since May last year — including the 25-basis-point hike last month — bringing the benchmark rate to 6.25%, the highest since 2007.

At the economic briefing, Mr. Medalla said the Bangko Sentral ng Pilipinas (BSP) would revise its inflation projections this year to less than 6%.

“The main reason for the revision is that the most recent inflation number from March is at the low end of the forecast range. That affects the forecast,” he said.

The 7.6% inflation in March was within the BSP’s 7.4-8.2% forecast. The central bank expects full-year inflation to average 6% this year before easing to 2.9% next year.

But rising global oil prices could still affect the country’s inflation, Mr. Medalla said.

Global oil prices spiked earlier this month after the Organization of the Petroleum Exporting Countries and their allies including Russia announced further output cuts…


2023-04-13 12:34:11

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