BSP chief leaves door open to one last cut, rules out off-cycle move

The Bangko Sentral ng Pilipinas (BSP) may cut benchmark rates by another 25 basis points (bp) next year to end its current easing cycle, its chief said on Friday, but ruled out an off-cycle or jumbo move.

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Asked how many cuts the central bank has room for next year, BSP Governor Eli M. Remolona, Jr. said: “Isa lang (Just one). Depends on the data.”

He however ruled out an aggressive action as this could send the wrong signal to markets.

“The cut is because the economy is weak, and demand has also weakened. So, on the demand side, we can help,” Mr. Remolona told reporters on the sidelines of the 4th Digital Financial Inclusion Awards. “But if we (deliver a) 50-bp or (an) off-cycle (cut), it will worsen the loss of confidence because they would say, ‘the BSP is desperate.’ That’s usually how it goes.”

“It is likely that if we deliver a rate cut, it will be during a regular meeting, not off-cycle.”

Mr. Remolona added that they are not considering their “Goldilocks” rate for now as they are still refining their estimates.

“So, for now, we will just focus on the output gap.”