BSP will begin implementing gradual interest rate cuts by Q3

According to Citi Economist for the Philippines Nalin Chutchotitham, the Bangko Sentral ng Pilipinas (BSP) is anticipated to embark on a path of gradual interest rate cuts, with the process likely commencing in the third quarter of the year. Chutchotitham suggests that the BSP’s Monetary Board will maintain its current interest rates throughout the first half of the year, citing robust economic growth prospects and inflation expectations within the central bank’s target range.

Chutchotitham forecasts that the BSP will implement its initial interest rate reduction on August 15, with a total reduction of 100 basis points expected by the end of the year. The expected rate cuts are projected to be implemented gradually, with reductions of 25 basis points per adjustment, ultimately reaching 5.50 percent by the end of 2024.

The BSP’s potential rate cuts are viewed as a response to global economic trends, particularly movements by the US Federal Reserve. However, Chutchotitham notes that the BSP’s current approach does not necessitate aggressive rate cuts, as economic momentum remains robust. This gradual approach allows the BSP time to assess market reactions to potential policy adjustments by the Federal Reserve.

While the BSP anticipates some short-term economic moderation due to monetary tightening, Chutchotitham remains optimistic about medium-term growth prospects. Additionally, she observes that the BSP is comfortable with inflation expectations, signaling a positive outlook for economic stability.

Business News: BSP will begin implementing gradual interest rate cuts by Q3