(Bloomberg) -- Philippine Finance Secretary Ralph Recto, who represents the government in the central bank’s rate-setting board, said he will back a 50-basis-point rate cut at the panel’s next meeting in October.
“Yes, I will support a similar rate cut,” Recto said in a mobile phone message when asked whether he sees a more compelling reason for Bangko Sentral ng Pilipinas to reduce borrowing costs again at next month’s meeting after the Federal Reserve’s half-point easing overnight.
The finance chief’s remarks on Thursday came a day after BSP Governor Eli Remolona signaled that the Fed move isn’t the main consideration in deciding borrowing costs. The Remolona-chaired seven-member Monetary Board kicked off an easing cycle in August, a month before the Fed’s pivot.
“What the Fed will do is one data point for us. It’s not most of the data,” Remolona told reporters on Sept. 18, hours before the Fed decision. He didn’t provide an outlook on interest rates on Wednesday, although he previously said he’s looking at another quarter-point cut this year.
The remaining BSP policy meetings in 2024 are set for Oct. 17 and Dec. 19.
Read: Philippines Pivots to Easing as Price Worries Take Backseat
“The BSP will likely cut rates as much as possible,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp. in Manila. He expects Philippine policymakers to match the Fed’s future rate easing and keep a 0.75-percentage point interest rate differential with the US.
Currency gains and slowing inflation are giving emerging nations scope to turn their focus toward supporting their economies. Indonesia surprised with a quarter-point cut on Wednesday, hours before the Fed move.
The Fed’s 50-basis-point reduction proved a boon to emerging assets including Philippine stocks and the peso on optimism that lower borrowing costs are underway. The nation’s main stock index jumped as much as 1.3% to its highest level since March 2022. That helped erase the peso’s early losses.
The local currency has strengthened along with the region even as the central bank unwinds its most aggressive tightening campaign in two decades. The BSP’s 450-basis-point rate hikes brought borrowing costs to a 17-year high.
Philippine inflation, which returned to the BSP’s 2%-4% target in August, is likely to further cool in the coming months as the government slaps lower tariffs on rice imports.
Easing price pressure plus expectations that economic growth may fall below the 6.5% to 7.5% government target for 2025 provides the BSP reasons to sustain the easing cycle.
--With assistance from Cecilia Yap.
(Updates with economist comments, market reaction throughout.)
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