More BSP rate cuts ahead

Expectations of further cuts in key borrowing costs as early as this month have grown stronger, driven by last month’s nearly six-year low inflation and lingering economic threats from United States (US) tariffs.

- By DERCO ROSAL

Following the below one-percent headline print in July, private-sector economists now look forward to the Bangko Sentral Pilipinas (BSP) extending its easing cycle, anticipating a cumulative 50 basis points (bps) in cuts by year-end.

Philippine Statistics Authority (PSA) Undersecretary and National Statistician Claire Dennis Mapa said earlier that the government’s P20-per-kilo rice program helped lower prices of the food staple last month, a trend that Filipinos began seeing since June.

July inflation across all income households dropped to 0.9 percent-the lowest since October 2019's 0.6 percentfrom 1.4 percent in June. This was substantially lower than last year's 4.4 percent inflation rate. Last month's headline rate also fell within the downscaled forecast of the BSP, at 0.5 to 1.3 percent.

"Soft inflation will likely increase the BSP's conviction and confidence to cut policy rates without the [US Federal Reserve]," HSBC Association of Southeast Asian Nations (ASEAN) economist Aris Dacanay said in an Aug. 5 commentary.