PHILIPPINE INFLATION may drop to 2.5% this month, giving the central bank an opportunity to lower interest rates more than expected, said Finance Secretary Ralph G. Recto on Tuesday.
But the government remains vigilant as the situation escalatesfA lict in the Middle East could lead to an increase in world oil prices, he said.
“Inflation is at a low level,” Mr. Recto, who recently participated in a Cabinet meeting on food and non-food managementflation, said the Palace forum. “We expect inflation to drop to 2.5% in September.”
September inflation data will be released on October 4.
Mr. Recto said the Bangko Sentral ng Pilipinas (BSP) could continue to cut interest rates and match the size of the US Federal Reserve’s jumbo rate cut.
“The Fed cut by 50 basis points (bps) or half a percent, I think we can do half a percent,” he said in mixed English and Filipino.
BSP governor Eli M. Remolona, Jr. earlier they said they could cut another 25 bps in the fourth quarter.
Easy entryfThe meeting prompted the BSP to begin its easing cycle at its August 15 meeting. The Monetary Board cut rates by 25 bps, bringing the benchmark rate to 6.25% from a 17-year high of 6.5%. This was fthis is the first time the BSP has cut rates since November 2020.
The subject is enteredfthe year-on-year decline was a seven-month low of 3.3% in August, from 4.4% in July, due to moderate increases in food prices and lower transport costs.
The year so far, infup 3.6%, slower than 6.6% last year.
Said Mr. Rectofthe figure would be 3.4% this year, and ease again to 2.9-3.1% in 2025.
BSP last month adjusted its basefbreeding forecasts to 3.4% for 2024 (from 3.3% previously), 3.1% for 2025 (from 3.2% previously), and 3.2% for 2026 (from 3.3% previously).
“Beauty in shrinkingfWhat is important is that your GDP growth increases and job opportunities are created, your borrowing costs decrease,” said Mr. Recto.
He said the possible rate cut would increase the Philippines’ chance of reaching its growth target of 6.5-7.5% by 2025.
However, Mr. Recto said that tensions in the Middle East threaten the governmentfexpectedly, we note that global oil prices would rise in the event of a war.
“Our biggest challenge is the external wind. Another war in the Middle East, and we don’t want that to get out of hand and possibly lead to an increase in oil prices,” said Mr.fbetween Israel and Lebanon’s Hezbollah.
“There is also pressure for electricity prices to increase,” he added.
Meanwhile, Diwa C. Guinigundo, Philippines country analyst for GlobalSource Partners, said the geopolitical conflicts “could cause a possible increase in oil, energy and food prices and ultimately,frelationship.”
“Insidefwhich shows some simple tendencies, within the targetfglobal forecasts and the balance of risks tilting downward, there is more accommodation by the BSP,” he said. BusinessWorld.
Asked to comment on the statements of Mr. Recto, the former deputy head of the BSP said: “I would expect our financial authorities to avoid talking about monetary policy especially in matters of in.fweather forecasts and the likely direction of monetary policy, as well as providing some form of guidance to the market.
The CEO of Security Bank Corp. Economist Robert Dan J. Roces said outsidethreats, especially conflits to Middle East and global oil priceses, it is still a “signifgreat concern.”
“Although these forecasts show successful anti-inflation measures, the real test lies in translating inflation into tangible benefits for ordinary citizens through job creation, improved social services, and sustainable economic practices,” said Mr. Roces in Viber message.
Leonardo A. Lanzona, who teaches economics at Ateneo de Manila University, said the government seems to be forgetting thatfThe boom has been fueled by food prices, not externalities.
“This has a lot to do with the internal management of the economy. Unless food, especially rice, prices are controlled, infthe risk remains,” he said in a Facebook Messenger chat.
Tuesday briefing, Secretary of Agriculture Francisco Tiu Laurel said the pressure on pork prices will ease as the government releases African Swine Fever vaccines, which has forced producers to release pigs.
The government tested the vaccine in the area with 10,000 doses, he noted, adding that the next 450,000 doses will be given next month.
“We hope that the purchase of 600,000 doses will end by December this year,” he said.
MAXIMUM LIQUIDITY
Meanwhile, Mr. Guinigundo said the government must closely monitor the amount of money that may be in excess after the increase in the reserve requirement ratio (RRR) by 250 bps.
“(This) may add about P500 billion. “Since there’s a small negative gap coming out, we don’t want to blow that window and run the risk of it happening again in the money because of the additional injection of liquidity,” he said.
“Underpinning this BSP monetary stance is positive inflation expectations even after the recent reduction in both the policy rate and the RRR,” he added.
At the Palace Forum, Mr. Recto, a member of the Monetary Board, said the BSP has considered the possibility of reducing the RRR.contract for inflation.
“We considered that when we decided on the policy at the last meeting of the BSP. This will be good for the economy. It will improve the financial markets,” he said. “We are investing approximately P380 billion in the program. It will be good for the banks. Again then, there will be lag efresult.”
The BSP will reduce the RRR for central banks and non-banking financial institutions with banking-like activities by 250 bps to 7% from the previous 9.5%, effective Oct. 25.
It will also reduce the rate for digital banks by 200 bps to 4%, thrift banks by 100 bps to 1%, and rural and cooperative banks by 100 bps to 0%. – Kyle Aristophere T. Atienza
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