MUFG sees room for further policy easing

THE BANGKO SENTRAL ng Pilipinas (BSP) could further lower interest rates this year to bolster economic growth amid benign inflation and global trade uncertainties, MUFG Global Markets Research said.

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"Growing trade headwinds will keep many regional central banks in a policy easing cycle to support growth, amid contained inflation," it said in a recent report.

"We expect BSP to cut the policy rate by another 50 bps (basis points) in the rest of this year, given rapidly moderating inflation."

If realized, this would bring the benchmark rate to 4.75% by end-2025, the lowest in nearly three years.

The central bank has lowered borrowing costs by a total of 125 bps since it began its rate-cutting cycle in August last year.

The Monetary Board’s next policy review is set for Aug. 28.

MUFG also noted the latest signals from BSP Governor Eli M. Remolona, Jr., who had said there is room for two more rate cuts this year due to manageable inflation.

MUFG expects headline inflation to average 1.8% this year, slightly higher than the central bank’s projection of 1.6%.