The Philippine central bank has signaled a potential interest rate reduction in the latter half of the year, following a decision to keep the benchmark interest rate steady for the fifth consecutive session on Thursday. The Monetary Board of the Bangko Sentral ng Pilipinas (BSP), under the leadership of Eli Remolona, maintained the reverse repurchase rate at 6.50 percent.
Consequently, the overnight deposit and lending facility rates remain at 6.0 percent and 7.0 percent, respectively.
During a press conference, Remolona commented, "We are somewhat less hawkish than before."
The BSP projects inflation to approach the upper limit of its target range. The inflation forecast for this year has been revised down to 3.8 percent from 4.0 percent, whereas the 2025 projection has been increased to 3.7 percent from 3.5 percent.
Based on recent GDP data, the central bank indicated that the medium-term outlook for domestic output growth remains largely stable, despite recent indicators suggesting continued moderation due to stringent financial conditions.
Gareth Leather, an economist at Capital Economics, anticipates that the central bank will soon begin easing monetary policy. He predicts a quarter-point rate cut in August, with additional reductions later in the year.
"Despite this recent shift in tone from the previously hawkish Remolona, we maintain our expectation that the BSP will only cut policy rates when the Federal Reserve does," said Nicholas Mapa, economist at ING.