BSP may cut rates next week

Despite economic growth accelerating in the second quarter, weak private demand may prompt the Bangko Sentral ng Pilipinas (BSP) to cut interest rates next week to help spur consumption and investments.

- KEISHA TA-ASAN

Aris Dacanay, economist for ASEAN at HSBC, said the second quarter gross domestic product data supports an August policy rate cut as GDP grew by 0.5 percent quarter-on-quarter, slower than the 1.5 percent quarterly average prepandemic.

“Based on historical trends, growth momentum is indeed waning, supporting our view that full-year growth will remain below trend in 2024 at 5.8 percent,” Dacanay said.

He said the BSP may cut its policy rates next week despite inflation rising to a nine-month high of 4.4 percent in July.

“With growth momentum slowing, the BSP will likely begin its easing cycle next week, starting with a 25-basis-point cut to 6.25 percent. We expect the BSP’s policy rate to be six percent by yearend and then five percent by end-2025,” he said.