Bangko Sentral ng Pilipinas Gov. Eli Remolona on Friday said an interest rate cut this year is possible, but it would be “too soon” to adjust in the first semester since inflation is projected to remain above target in the second quarter of the year.

The country’s reverse repurchase rate (RRP), used by banks to price loans, is at 6.5 percent.

“Oo naman, within the year. But maybe first semester is too soon. (2nd half gov?) pwede siguro,” Remolona said during the BSP’s Annual Reception for the Banking Community.

Inflation eased to 3.9 percent in December 2023. However, the full year average hit 6 percent, which is above the government’s 2 to 4 percent target range.

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“The number that might come out in January might be a bit low. And then babawi ‘yon sa second quarter. So second quarter numbers may be a bit high only because of base effects, not because inflation is really high,” he said.

Remolono said he also expects a strong gross domestic product (GDP) growth outturn for the last quarter of 2023.

The country’s economy expanded by 5.9 percent in the third quarter of 2023.

Remolona said a strong growth could accommodate a hike in interest rate.

“If the growth is strong, that gives us more room to hike. Kasi strong growth eh, so kaya ng economy na tanggapin,” Remolona said.

Finance Secretary and Monetary Board Member Ralph Recto, meanwhile, stressed that the board would decide based on data while highlighting some benefits of lower interest rates.

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“Lowering interest rates, of course bababa ang interest rate ng borrowing cost sa gobyerno. But more importantly, there will be more investment coming in. Not only coming in, but domestic also. Our domestic businessmen,” Recto said.

Fourth quarter growth and the 2023 overall GDP performance will be announced on Jan. 31.