Economists See More Rate Cuts as Inflation Eases to 6-Year Low

The sharper-than-expected drop in inflation to a six-year low in July has strengthened the case for further policy rate cuts by the Bangko Sentral ng Pilipinas, with economists saying a third reduction could follow at the next BSP policy meeting this month.

- By KEISHA TA-ASAN

HSBC economist for ASEAN Aris Dacanay said the benign inflation path gives the BSP "more confidence that it can proceed with its easing cycle," regardless of the action taken by the US Federal Reserve.

"Our baseline scenario is for the BSP to pause its easing cycle during the August rate-setting meeting, but the soft inflation outlook increases the risk of a rate cut," Dacanay said.

HSBC's baseline sees the key rate falling to five percent by year-end from the current 5.25 percent, with the risk of a deeper easing cycle if economic growth disappoints.

The Philippine Statistics Authority will release its second-quarter gross domestic product (GDP) data today.