Philippine rate cut unlikely this week despite tame inflation
The central bank has cut its key rate by 150 basis points since August 2024 as inflation slowed, backed by declining rice prices
[MANILA] Philippine inflation stayed below the central bank’s target range in September, but the central bank isn’t likely to cut its benchmark interest rate at this week’s meeting following the peso’s recent weakness.
Consumer prices rose 1.7 per cent last month from a year ago, the Philippine Statistics Authority (PSA) said on Tuesday (Oct 7). That was below the 1.9 per cent median estimate in a Bloomberg News survey and followed the 1.5 per cent rate in August.
Inflation has come in under the Bangko Sentral ng Pilipinas’ (BSP) 2 to 4 per cent goal for the seventh month in a row, with a further decline in rice prices helping keep overall inflation in check. Core inflation, which excludes some food and energy items, eased to 2.6 per cent from 2.7 per cent in August.
The latest data did not appear to affect financial markets on Tuesday. The benchmark stock index rose 0.5 per cent and the peso edged up 0.2 per cent against the US dollar at 10.50 am.
The next interest rate cut may not happen this week, given the peso’s recent depreciation against the US dollar, which could lift energy and food prices. The central bank has two policy meetings left for this year, one on Thursday and another in December.
“For the upcoming policy meeting, the Monetary Board will review newly available information and reassess the impact of prior monetary actions in light of evolving economic conditions and their implications for inflation and growth,” the central bank said in a statement after the inflation report.
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The central bank has cut its key rate by 150 basis points since August 2024 as inflation slowed, backed by declining rice prices.
BSP governor Eli Remolona has signalled an end to the easing cycle after August’s quarter-point cut in its overnight target reverse repurchase rate to 5 per cent, the lowest in almost three years. He said that there’s room for another interest rate cut if demand weakens.
The recent rains and flooding, particularly in vegetable-producing provinces, had affected prices, National Statistician Dennis Mapa said at a briefing. “The sources of inflation may be temporary,” he said, citing the impact of typhoons that hit the country in August and September.
The central bank said that inflation is projected to average below its target range this year, mainly due to easing rice prices, and will likely settle within that range in 2026 and 2027. BLOOMBERG
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