âLow, steady inflationâ gives BSP room to cut rates: DOF
THE âlow and steadyâ inflation recorded in January 2024 gives the Bangko Sentral ng Pilipinas (BSP) room to reduce key policy rates to boost household spending and economic growth, according to Finance Secretary Ralph G. Recto.
âThis is a strong indicator of the governmentâs commitment to keeping prices stable and signals that the BSP has more flexibility to further reduce interest rates,â said Recto, who also sits as a member of the Monetary Board, the BSPâs highest policy-making body.
âLower interest rates mean cheaper borrowing costs for our consumers and businesses. This will provide greater purchasing power for our people and stronger momentum for investments and growth,â the Finance chief added.
The Philippine Statistics Authority (PSA) reported on Wednesday that inflation reached 2.9 percent in January 2025, the same rate posted in December 2024. However, this was still faster than the 2.8 percent in January 2024. (See: https://businessmirror.com.ph/2025/02/05/inflation-stands-at-2-9-in-january-psa/).
Food inflation accelerated to 3.8 percent from 3.4 percent in December 2024, driven by higher vegetable prices.
Meanwhile, rice posted a year-on-year deflation of -2.3 percent in January 2024, the steepest deflation recorded since 2020.
âThis is a welcome relief for Filipino consumers. But rest assured, the government will not be complacent. We will remain proactive in implementing interventions to ensure stable and affordable rice prices,â Recto said.
The latest inflation print is within the governmentâs inflation target of 2 to 4 percent this year until 2028, based on what the Development Budget Coordination Committee (DBCC) had set in December 2024.
Previously, Recto said the Monetary Board could cut interest rates more aggressively than the United States Federal Reserve by as much as 75 basis points this year but would âdepend on what inflation looks like in the Philippines.â
Fed officials have signaled a slower pace of policy this year, with economists expecting a total 50 bps reduction.
Last week, BSP Governor and Chairman of the Monetary Board Eli M. Remolona Jr. said interest rates could be reduced by 50 basis points this year as the BSP needs some policy insurance against inflation.
An initial 25-bps policy rate cut could be delivered in the first half of the year while another 25-bps will follow in the second half. âNot every meeting weâll see a policy rate decline,â Remolona said.
Should a 50-bps reduction be implemented, this would bring down interest rates to 5.25 percent.
The Monetary Board is set to meet on February 13, its first rate-setting meeting for the year.
Source: https://businessmirror.com.ph/2025/02/06/low-steady-inflation-gives-bsp-room-to-cut-rates-dof/