BSP likely to cut rates in second half, in lockstep with Fed: ING
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BSP likely to cut rates in second half, in lockstep with Fed: ING
MANILA -- The Bangko Sentral ng Pilipinas (BSP) may cut interest rates in the second half of the year, an economist said Monday.
MANILA -- The Bangko Sentral ng Pilipinas (BSP) may cut interest rates in the second half of the year, an economist said Monday.
"With inflation expected to stay within target, I expect the BSP to stay hawkish in the near term, and the BSP to cut last half, or as soon as the Fed does," ING Philippines Senior Economist Nicky Mapa said at their bank's annual briefing.
"With inflation expected to stay within target, I expect the BSP to stay hawkish in the near term, and the BSP to cut last half, or as soon as the Fed does," ING Philippines Senior Economist Nicky Mapa said at their bank's annual briefing.
Asked about ING's view on the timing and magnitude of the rate cuts, Mapa said this depends on the movement of the US Federal Reserve.
Asked about ING's view on the timing and magnitude of the rate cuts, Mapa said this depends on the movement of the US Federal Reserve.
"It sort of depends, 50 or 75 [basis points]. It still always depends on the Fed. Difficult to see them moving ahead of the Fed," he noted.
"It sort of depends, 50 or 75 [basis points]. It still always depends on the Fed. Difficult to see them moving ahead of the Fed," he noted.
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"If we see aggressive rate cuts by the Fed, then maybe the BSP can follow," he added.
"If we see aggressive rate cuts by the Fed, then maybe the BSP can follow," he added.
The Fed in December voted to hold interest rates at a 22-year high for the third straight meeting, and policymakers signaled they expect to make three rate cuts in 2024.
The Fed in December voted to hold interest rates at a 22-year high for the third straight meeting, and policymakers signaled they expect to make three rate cuts in 2024.
The BSP kept the country’s benchmark target reverse repurchase rate (RRP) steady at 6.5 percent in the Monetary Board's first meeting of the year.
The BSP kept the country’s benchmark target reverse repurchase rate (RRP) steady at 6.5 percent in the Monetary Board's first meeting of the year.
Rob Carnell, ING Asia Pacific Head of Research, said they see aggressive rate hikes from the Fed starting May.
Rob Carnell, ING Asia Pacific Head of Research, said they see aggressive rate hikes from the Fed starting May.
"We've got 150 basis points of easing from the Fed starting from May. So we didn't really buy into the March story. We thought that was nonsense, it was way too early," he said.
"We've got 150 basis points of easing from the Fed starting from May. So we didn't really buy into the March story. We thought that was nonsense, it was way too early," he said.
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Carnell said it would be very difficult to imagine the Fed hiking rates at this stage, but he wouldn't completely rule it out.
Carnell said it would be very difficult to imagine the Fed hiking rates at this stage, but he wouldn't completely rule it out.
He said inflation may drop to very low levels through the middle of the year.
He said inflation may drop to very low levels through the middle of the year.
"Big question, what happens then? It is possible you start to see inflation moving back up again through the second half of the year and let's just suppose that the Fed has been very, very cautious and hasn't eased already by that stage.
"Big question, what happens then? It is possible you start to see inflation moving back up again through the second half of the year and let's just suppose that the Fed has been very, very cautious and hasn't eased already by that stage.
"Could I perhaps imagine that maybe one last 25 basis points (bps) hike is something that they need to deliver to properly pull inflation back down? I mean again, I think it's a difficult thought experiment to run but it's not an impossible one," he said.
"Could I perhaps imagine that maybe one last 25 basis points (bps) hike is something that they need to deliver to properly pull inflation back down? I mean again, I think it's a difficult thought experiment to run but it's not an impossible one," he said.
Mapa said capital inflation may increase in 2024 if interest rates ease.
Mapa said capital inflation may increase in 2024 if interest rates ease.
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"After rate cuts in 2019 there was a bit of a pickup in capital formation," he said.
"After rate cuts in 2019 there was a bit of a pickup in capital formation," he said.
The economist noted that capital formation was soft in 2023 on the back of high interest rates.
The economist noted that capital formation was soft in 2023 on the back of high interest rates.
The Philippine economy expanded by 5.6 percent in 2023, missing the government target of 6 to 7 percent.
The Philippine economy expanded by 5.6 percent in 2023, missing the government target of 6 to 7 percent.
On the demand side, household final consumption grew year-on-year by 5.3 percent in the fourth quarter of 2023. Gross capital formation rose by 11.2 percent, but government expenses declined by 1.8 percent.
On the demand side, household final consumption grew year-on-year by 5.3 percent in the fourth quarter of 2023. Gross capital formation rose by 11.2 percent, but government expenses declined by 1.8 percent.
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