THE Monetary Board could start cutting rates in the fourth quarter of the year, as signaled by Finance Secretary Ralph G. Recto ahead of the Monetary Policy Meeting on Thursday, May 16.
Recto told reporters on the sidelines of the 54th anniversary of the Development Budget Coordination Committee (DBCC) on Tuesday that the Monetary Board is likely to keep its rates unchanged in the next policy meeting.
“So far, the way I see it, unless something changes between now and then, I think more or less [steady],” said Recto, a member of the Monetary Board, the highest policy-making body of the Bangko Sentral ng Pilipinas (BSP).
Moving forward, the Finance chief added he expects rates to go lower not in the next policy meeting but possibly within the end of the year.
Earlier, BSP Governor Eli M. Remolona Jr. said the central bank is likely to maintain its key policy rates as inflation remains elevated.
However, if inflation relaxed to 3 percent consecutively in the coming months and within the target “comfortably,” Remolona said the Board would have room to cut interest rates by 25 basis points (bps).
Asked if he expects the central bank to strike a hawkish tone after the gross domestic product (GDP) settled at 5.7 percent in the first quarter of the year, Recto said it all depends on inflation.
“The expectations for inflation this year are lower than expected by the BSP. But it will be sticky,” Recto added.
The Finance chief expects inflation to go “a little bit higher” next year as well.
Headline inflation settled at 3.8 percent in April, within the BSP’s target range of 3.5 to 4.3 percent and the Development Budget Coordination Committee’s (DBCC) range of 2.0 to 4.0 percent.
Recto expressed confidence that the country will post a growth of 6 percent before the end of the year since inflation is seen to decline together with rice prices slowing down.
