Philippines C.Bank Expects Rate Cuts in 2024, with Flag RRR Reduction

The Philippines' central bank governor said on Thursday that if inflation is under control, benchmark interest rates may be dropped in 2024 and that banks' reserve requirements might be reduced in the first half of this year.

While pent-up domestic demand will power the economy this year, it will likely dissipate by 2024, according to Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla, speaking at a Rotary Club event.

“By 2024, when the pent-up demand is gone, perhaps monetary policy will be substantially looser than it is today,” he added.

Since last year, central banks across the globe, headed by the United States Federal Reserve, have rushed to limit high inflation via substantial hikes in benchmark rates, slowing economic growth and fueling recession worries.

Another easing action might entail lowering banks' reserve requirement ratios, with a strong possibility of doing so in the first half, according to Medalla.

“Cutting the RRR is critical to us,” he stated.

The RRR, or the proportion of deposits and deposit substitutes that banks must retain with the BSP, was last reduced by 200 basis points to 12% in March 2020 by monetary authorities.

Medalla said that the BSP is prepared to adopt more monetary policy steps to return inflation to a target-consistent path.

The consumer price index PHCPI=ECI increased 8.1% year on year in December, reaching a 14-year high, mostly due to higher food and energy prices. The statistic raised the average full-year inflation rate to 5.8%, a 14-year high and far beyond the stated goal zone of 2%-4%.

“If the United States raises policy rates, we don't have to equal it, but if it's 50 basis points, it's difficult not to react, at least somewhat,” Medalla added.

Download link for IOS and Android

https://www.wikifx.com/en/download.html