POLL-Philippine c.bank to keep rates on hold on Thursday, cut in third quarter

Credit: REUTERS/Romeo Ranoco

By Anant Chandak

BENGALURU, Feb 13 (Reuters) - The Philippine central bank will keep its benchmark interest rate unchanged on Thursday as inflation remains within the bank's 2-4% target range, according to a Reuters poll of economists, who expected a first rate cut in the third quarter of 2024.

Despite inflation easing to 2.8% in January from 3.9% in December, Bangko Sentral ng Pilipinas (BSP) governor Eli Remolona recently said there was room for an interest rate hike, but a cut was unlikely anytime soon.

However, all 24 economists in the Feb. 6-12 Reuters poll expected the BSP to leave its overnight borrowing rate PHCBIR=ECI unchanged at 6.50% on Thursday. The survey also showed no change to the rate at least until the end of June.

The BSP has raised rates by 450 basis points since May 2022, including an off-cycle hike in October.

"We expect the BSP to remain on hold at its next meeting... While we think there is a risk the BSP could hike should further inflationary pressures appear, but this is not our baseline case," said Makoto Tsuchiya, economist at Oxford Economics.

"We forecast the BSP to cut the policy rate by 125 bps this year. I think the risks are towards fewer cuts given upside risks to both inflation and growth. Particularly, domestic demand has been more resilient than we had assumed so far."

While a separate Reuters poll showed inflation breaching the upper limit of the target range to average 4.1% in the next quarter it was then forecast to edge lower in the second half to average 3.5% for the year.

Interest rates will remain unchanged until the end of the second quarter, followed by 50 basis-point cuts each in the remaining two quarters of the year, the poll medians showed.

Still, a strong minority of economists, nine of 21, expected a 25 basis points cut or more by the end of June.

Among those who had a forecast until the end of the third quarter, over half, 10 of 19 economists saw the policy rate at 6.00%, four expected rates at 6.25% and three saw them at 5.75%. Only two predicted interest rates on hold at 6.50%.

"I don't think the BSP is going to bite the bullet on another rate hike. The runway to lower rates is probably longer. Our forecast is for the second quarter, the risk is that they push it into the third quarter," said Lavanya Venkateswaran, senior ASEAN economist at OCBC.

(Reporting by Anant Chandak; Polling by Devayani Sathyan; Editing by Hari Kishan and Susan Fenton)

((Anant.Chandak@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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