THE Bangko Sentral ng Pilipinas (BSP) views the risks to inflation to be weighted towards the downside ahead of its next decision on interest rates, a central bank official said.
“To answer the question on under what conditions we might consider easing further… We need to make sure that inflation stays within target. The risk will be clearly tilted to the downside,” Lara Romina E. Ganapin, director of the BSP’s Monetary Policy Research Group, said during the Philippine Economic Briefing in Mabalacat, Pampanga on Monday.
“Expectations, which are a very important channel, should remain well-contained and well-anchored, (showing) no signs of second-round effects. And of course, we also need to look at growth risk,” she added.
The BSP’s policy rate is currently 5% after the Monetary Board last month lowered borrowing costs by 25 basis points (bps) for a third straight meeting.
It has now cut benchmark interest rates by a total of 150 bps since it began its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. said the current key rate is now at a “sweet spot” for both inflation and output, but one more reduction is possible within the year to support the economy if needed, which would likely mark the end of the rate cut cycle.
In August, inflation picked up to 1.5% from 0.9% a month earlier. It was the sixth straight month of inflation coming in below the BSP’s 2-4% target range.
In the first eight months, inflation averaged 1.7%, in line with the central bank’s full-year target.
The economy grew 5.5% in the second quarter, driven by a rebound in agriculture output and stronger household spending. During the first quarter, growth had been 5.4%.
“We could still see some risk from supply shocks because there are still ongoing geopolitical tensions from the Ukraine-Russia conflict. There are also impacts from the adverse weather conditions,” Ms. Ganapin said.
She added that the central bank is also monitoring external developments such as US tariff policy, policy shifts in other countries and the Federal Reserve’s monetary policy stance.
“We remain vigilant, of course, to safeguard price stability and to support sustainable growth,” Ms. Ganapin said. — Katherine K. Chan
