Gradual interest rate cuts appropriate for the Philippines, IMF says
It also predicts that the country’s economy will grow 5.8% this year, down from its July forecast of 6%
A “GRADUAL” easing of monetary policy is appropriate for the Philippines as inflation returns towards the central bank’s target, the International Monetary Fund (IMF) said on Wednesday (Oct 2).
The Bangko Sentral ng Pilipinas (BSP) cut its benchmark rate by 25 basis points to 6.25 per cent in August – the first reduction in nearly four years as inflation eases.
“With inflation and inflation expectations returning to target, a continued gradual reduction of the policy rate is appropriate,” IMF mission chief Elif Arbatli-Saxegaard said.
“Along this declining rate path, it will still be important for the BSP to anchor inflation expectations in the target band and remain data-dependent and agile.”
The IMF, however, declined to suggest a pace and magnitude for potential cuts at the BSP’s policy-setting meetings on Oct 16 and Dec 19.
BSP governor Eli Remolona said on Monday it had scope to do a 50 basis point rate cut in one policy meeting, but such a big reduction would only happen if there were worries about a “hard landing” for the economy.
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Inflation slowed to a seven-month low of 3.3 per cent in August, and is expected to have slowed further in September, the BSP added.
The central bank has set a 2 to 4 per cent inflation target for this year and next.
The IMF on Wednesday also lowered its 2024 and 2025 growth projections for the Philippines due to tepid consumption growth in the second quarter.
The Philippine economy will grow 5.8 per cent in 2024, down from its July forecast of 6 per cent, and 6.1 per cent next year, compared to its previous projection of 6.2 per cent, the international financial agency added.
Both estimates are below the Philippine government’s growth targets of 6 to 7 per cent this year, and 6.5 to 7.5 per cent in 2025.
The Philippines’ current account deficit is seen at 2 per cent of the economy this year, compared to the 2.1 per cent forecast shortfall in June, the IMF said.
It expects that deficit to be 1.9 per cent of gross domestic product next year. REUTERS
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