BSP unlikely to cut rates this year due to high inflation

ANZ Research says the Bangko Sentral ng Pilipinas (BSP) is unlikely to cut interest rates this year due to inflation remaining near the upper end of its 2-4% target range.

Despite easing overall, inflation in the Philippines remains close to the target ceiling, prompting analysts to expect no rate changes at Thursday's Monetary Board meeting.

ANZ forecasts a half-percentage-point cut to the policy rate starting in March 2025, with further reductions planned throughout next year, bringing the benchmark rate to 5% by end-2025 from its current 17-year high of 6.5%.

The BSP's Governor Eli Remolona Jr. suggested a possible August start for easing monetary policy but acknowledged financial conditions are already tighter than necessary due to high borrowing costs.

ANZ also noted that the Philippines' improving external position could provide support for the peso, which has weakened amid hawkish signals from the US Federal Reserve and dovish remarks by some BSP officials.