Inflation may rise in the next few months before easing in the third quarter, prompting the Bangko Sentral ng Pilipinas (BSP) to consider unwinding high interest rates before the end of 2024, according to forecasts from two banks.
This comes after Philippine inflation accelerated to 3.9 percent in May from 3.8 percent the prior month, albeit at a slower pace than the 4 percent market consensus.
The Bank of the Philippine Islands said this reinforces the view that the BSP will keep interest rates unchanged until cost pressure risks are resolved.
“Rate cuts may only be considered once inflation stabilizes within the BSP’s target range in the third or fourth quarter [of 2024],” BPI said, adding that this also depends on the timing of rate cuts in the US.
Metropolitan Bank & Trust Co. also expects inflationary pressures to rise and potentially peak in July, prompting the bank to revise its year-end average inflation forecast to 4 percent “with a downward bias.”
This was attributed to the anticipated softening of rice and oil prices.
“Metrobank Research maintains its view that the BSP will likely begin its monetary easing cycle in [the fourth quarter] 2024 should the US Federal Reserve start cutting in September 2024,” it said.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
