BSP to maintain cautious stance, 50 basis point rate cuts possible in 2nd half of 2024, BPI says

The Bangko Sentral ng Pilipinas (BSP) is expected to maintain a cautious approach to monetary policy, likely keeping key interest rates steady through the first half of the year before possible rate reductions of around 50 basis points in the second semester, according to Bank of the Philippine Islands (BPI)

The lender said rate cuts could be on the table in the third or fourth quarter, contingent on inflation stabilizing within the BSP's target range and influenced by the Federal Reserve's policy directions, given the US economy's resilience and halted disinflation.

Any premature rate cut by the BSP, before the Federal Reserve acts, risks a narrower interest rate differential that could prompt currency depreciation, counteracting the recent slowdown in food prices, BPI added. 

Philippine headline inflation rose 3.8 percent in April 2024, slightly higher than the 3.7 percent recorded the previous month but slower than the 4.1 percent increase expected by the market. Core inflation moderated further from 3.4 percent to 3.2 percent.