Economists split on BSP rate cuts

While private-sector economists project further cuts by year-end, the escalating tensions between Israel and Iran have posed challenges for the Bangko Sentral ng Pilipinas (BSP) in its future policy stance, given the lingering threats to inflation and the peso.

- BY DERCO ROSAL

Bank of the Philippine Islands (BPI) lead economist Emilio Neri said in a commentary published on Friday, June 20, that the “conflict in the Middle East has made further easing more difficult, as higher oil prices add pressure to inflation and the peso.”

Neri believes “another rate cut this year remains possible given the recent statements from the BSP,” but if the tit-for-tat attacks between Israel and Iran “escalated further, it could even prevent the BSP from cutting rates further.”

Meanwhile, Nomura Asia economists Euben Paracuelles and Nabila Amani maintained their projection that the central bank will deliver a cumulative of 50 basis points (bps), which would bring the key interest cost down to 4.75 percent from the latest 5.25 percent.

Paracuelles and Amani said they took note of the BSP’s “dovish tone” when it announced a quarter-point cut during the policy-setting Monetary Board’s (MB) third policy meeting on June 19.