Philippine central bank seen on hold for rest of the year, to cut in Q1 2024: Reuters poll

By Veronica Dudei Maia Khongwir

(Reuters) – The Philippine central bank is expected to keep its key interest rate steady at 6.25% for a fourth consecutive meeting on Thursday and for the rest of the year despite inflation accelerating in August, a Reuters poll of economists showed.

Inflation rose above the central bank’s 2%-4% target range to 5.3% in August, the first increase in seven months, suggesting the Bangko Sentral ng Pilipinas (BSP) fight to contain price rises was not yet over.

But Governor Eli Remolona recently said inflation should reach the target range by October and there was no need for the bank to raise rates unless there were further supply shocks.

All but two of the 25 economists polled by Reuters between Sept. 12 and Sept. 18 expected the BSP to leave its key overnight borrowing rate at 6.25% when it meets on Sept. 21. Two forecast a 25 basis point hike.

While 15 out of 20 respondents saw rates at 6.25% for the rest of the year, two forecast them to rise to 6.50%. Three predicted rates at 6.00% or lower by end-2023.

“This is the first time in a few months the BSP is digesting a number that sees an uptick in inflation rather than a continued decline. For the most part, we still think that they will hold,” said Miguel Chanco, chief emerging Asia economist at Pantheon.

“The BSP needs to take more note of the weakening economic picture, and assuming the inflation number starts to cooperate again in November, we expect them to start a gradual easing cycle to take pressure off of the economy.”

With economic growth slowing faster than previously expected, most poll participants forecast the next move by the central bank would be a cut.

Among 19 economists whose forecasts extended to end of the first quarter of 2024, 13 expected rates to be at 6.00% or lower. Five expected them to still be at 6.25% and one at 6.50%.

Median forecasts of a smaller sample showed the BSP would gradually reduce rates next year, reaching 5.50% in the second quarter and 5.25% in the third.

(Reporting by Veronica Dudei Maia Khongwir in Bengaluru; Polling by Devayani Sathyan and Milounee Purohit; Editing by Tomasz Janowski)