Analysts mixed on timing of BSP rate cut

Local and foreign analysts are divided on whether the Bangko Sentral ng Pilipinas (BSP) has room to cut ahead of the US Federal Reserve, as doing so may put pressure on the peso.

- KEISHA TA-ASAN

Security Bank chief economist Robert Dan Roces said the recent statement of the BSP chief on cutting rates as early as August, possibly ahead of the Fed, has raised interesting points for consideration.

Last week, right after the central bank kept the key interest rate at a 17-year high of 6.5 percent, BSP Governor Eli Remolona Jr.

said the Monetary Board may cut borrowing costs as early as August while he expects the Fed to cut in September.

"The governor's willingness to consider rate cuts ahead of the Fed confident in the stability of the domestic economy and the anchoring of inflation expectations, or that it may be worried about the potential impact of prolonged elevated rates to the economy," Roces said.

Still, Remolona's recent statement is a positive signal to the market, which shows that the BSP sees the Philippine economy is well-positioned to handle a slight divergence from the Fed, he said.

However, beginning an easing cycle before the Fed may have an adverse impact on the peso.