The Bangko Sentral ng Pilipinas is seen slashing interest rates by as much as 100 basis points this year as easing inflation could support the growth of the country’s banking sector in the next two years, Fitch Ratings said.
Fitch analysts Tamma Febrian and Willie Tanoto said in an analysis that easing inflation would open up policy space for the BSP to cut rates later this year.MANILA, Philippines — The Bangko Sentral ng Pilipinas is seen slashing interest rates by as much as 100 basis points this year as easing inflation could support the growth of the country’s banking sector in the next two years, Fitch Ratings said.
The BSP’s key policy rate is currently at 6.50 percent, the highest in nearly 17 years, after the Monetary Board tightened borrowing costs by a total of 450 basis points between May 2022 and October 2023. “The forecast puts the Philippines among the fastest expanding economies in the region, with growth rates significantly outpacing BBB-rated sovereigns’ median of about 2.9 to 3.2 percent,” Fitch said.
“Partially offsetting the decline in margins is a recovery in loan demand and larger trading gains as banks realize higher valuations on debt securities amid declining rates,” Fitch said. The Bangko Sentral ng Pilipinas might start its policy easing in the third quarter, but upside risks due to inflationary pressures...
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