The Bangko Sentral ng Pilipinas (BSP) may start reducing key policy rates if the negative month on month growth trend in inflation would be sustained longer. Know more:
THE Bangko Sentral ng Pilipinas may start reducing key policy rates if the negative month on month growth trend in inflation would be sustained longer.
“For a pause, it’s one more observation point but, for a cut, maybe five more? We have to be more confident that the low month on month is really now the central tendency,” Medalla said. “The only reason we are not cutting the reserve requirement is we don’t want to confuse the markets which is ‘why are you cutting the reserve requirement when you are raising rates?’ But that confusion will be gone if we pause. Therefore, that gives us time to cut the reserve requirement,” Medalla said.
Medalla said the target of the BSP is for inflation to be at 2 to 4 percent or three percent plus or minus one by next year. This means, the month on month decline in inflation places the country on track to meet its target for next year. Medalla added that the Philippine bond market has “relatively short tenors” of below 30 years, preventing any large losses stemming from the recent hike in interest rates, similar to the experience in the United States.
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