The Bangko Sentral ng Pilipinas (BSP) may delay its rate cuts due to persistently high inflation, according to HSBC Research. Economist Aris Dacanay noted that rising rates would not effectively combat supply-side price pressures. Despite this, Dacanay believes the BSP can afford to wait, citing a resilient economy, improving labor market, and strong credit growth supporting consumption.
Governor Eli Remolona Jr. hinted at a possible rate cut in the fourth quarter of 2024 or the first quarter of 2025 if inflation stays above target levels. This delayed easing disappointed expectations of a third-quarter cut, with the United States also facing stubborn inflation.
The BSP has maintained its key rate at 6.5 percent, the highest in nearly 17 years. Dacanay of HSBC contended that local monetary policy could not tighten further and downplayed the risk of additional rate hikes. He emphasized the need for supply-side interventions to address inflation risks effectively.
