By Aubrey Rose A. Inosante, Reporter
THE Bangko Sentral ng Pilipinas (BSP) may deliver one more policy rate cut before year-end, but the move could depend on whether the US Federal Reserve lowers borrowing costs in its meeting this week, Finance Secretary Ralph G. Recto said on Tuesday.
Mr. Recto, who sits as a member of the BSP’s Monetary Board, told reporters the central bank is weighing the likelihood of the Fed’s first rate reduction this year and its implications for global capital flows.
“(This) depends on what happens in the US as well with the Fed,” he said. “[It] depends of course on our inflation numbers. But clearly, I think we can reduce the policy rate by another 25 basis points (bps).”
The Finance chief projected that the BSP might still implement two “safe” cuts of 25 bps each at its policy meetings on Oct. 9 and Dec. 11.
The BSP resumed monetary easing after inflation cooled within its 2-4% target, though a recent uptick in August could complicate its policy path.
Inflation averaged 1.7% in the first eight months, matching the BSP’s full-year forecast. The Philippine Statistics Authority will release September inflation data on Oct. 7.
Last month, the Monetary Board cut the benchmark rate by 25 bps to 5%, the lowest since November 2022. Since it started its easing cycle in August 2024, the BSP has slashed policy rates by 150 bps, including two separate 25-bp cuts each in April and June.
BSP Governor Eli M. Remolona, Jr. earlier noted that while the central bank had reached a “sweet spot” in its easing cycle, there is still space for another cut. However, he cautioned that shifts in inflation and external factors could alter the trajectory.
Mr. Recto said the Philippine economy remains on track to achieve its 2025 growth target of 5.5% to 6.5%. He also said the central bank is not yet in the final stretch of its easing cycle.
He added that the Philippines’ possible inclusion in JPMorgan’s Government Bond Index for Emerging Markets could boost investor confidence and help lower borrowing costs.
“What is important is that we may be included in the JP Morgan index,” he said.
“That will reduce rates as well. We’re very excited about that, and we have a good chance of getting 3% [or] 4% now. We’ll be in that basket, [and it will be] good for our credit rating.”
The Department of Finance earlier said the Philippines has been placed on JPMorgan’s positive watchlist, a precursor to inclusion in the index. Such membership could channel billions of dollars of passive investment into peso-denominated government bonds.
In a separate commentary, Nomura Global Markets Research said the BSP still has space to ease policy further while balancing the government’s fiscal consolidation drive with growth support.
“The government remains committed to its fiscal consolidation agenda but is slowing the pace in order to support growth, while BSP still has some scope to ease further,” Nomura economist Euben Paracuelles said.
Meanwhile, Mr. Recto said the Philippines is unlikely to return to the Financial Action Task Force’s (FATF) “gray list” of jurisdictions under increased monitoring for money laundering amid the government’s anti-corruption drive.
“We are already catching them,” he said. “They are being sued. People will be jailed. We will get our money back,” he added, referring to investigations into money laundering involving former Public Works engineers. The officials allegedly funneled flood-control funds through casinos.
The FATF removed the Philippines from its gray list in February after improvements in anti-money laundering and counterterrorism financing frameworks.
Last week, Senator Panfilo M. Lacson revealed that some Public Works officials allegedly laundered billions of pesos siphoned from flood-control projects by gambling in casinos and converting funds into chips.
