BSP expected to cut rates this month — Metrobank

THE Bangko Sentral ng Pilipinas (BSP) may again reduce key borrowing costs this month with inflation remaining subdued, Metropolitan Bank & Trust Co. (Metrobank) said.

“With inflation still below target and forecast to remain (consistent with targets) over the policy horizon, BSP is likely to consider cutting rates further to support sagging growth momentum,” Metrobank Chief Economist Nicholas Antonio T. Mapa said via Viber.

A BusinessWorld poll of 15 analysts yielded a median estimate of 1.6% for November inflation, within the BSP’s 1.1% to 1.9% projection for the month.

If realized, last month’s inflation would be below the 1.7% reported in October and the 2.5% year-earlier reading. The analyst consensus level for November would bring 11-month average inflation to 1.7%, on pace with the BSP’s full-year forecast.

November inflation could also be the weakest since the 1.5% posted in August. The analyst consensus level would represent the ninth straight month that inflation came in below the central bank’s 2%-4% target band.

Metrobank research officers Maria Kaila Balite and Joaquim Pantanosas said inflation may have picked up to 1.8% in November as a result of supply shocks caused by typhoons.

However, “rice deflation will keep (inflation) below the Bangko Sentral ng Pilipinas’ target,” they said in a Metrobank Wealth Insights report released on Monday.

In November, Typhoon Kalmaegi (Philippine name: Tino), Super Typhoon Fung-Wong (Uwan), and Typhoon Koto (Verbena) brought heavy rains and flooding across the country.

“We expect food and energy prices to remain the major contributors to inflation in November, driven by storm-slicked price pressure and higher power transmission charges,” Metrobank said.

“However, lower prices of rice year on year will continue to pose downside risks to inflation. Metrobank expects headline inflation to remain below the BSP’s 2%-4% target in November.”

The average price of domestically grown regular-milled rice fell 16.45% to P37.28 per kilo in the Nov. 10-15 period, according to the Philippine Statistics Authority. 

Well-milled rice prices declined 11.68% to P42.33 per kilo, while special rice prices fell 5.12% to P56.92 per kilo.

The central bank has lowered benchmark borrowing costs by a cumulative 175 bps since it began its easing cycle in August last year, with the policy rate now at an over three-year low of 4.75%.

BSP Governor Eli M. Remolona, Jr. has said the monetary authorities could ease further at the Monetary Board’s Dec. 11 meeting and next year to support the economy amid weakening growth prospects. — Katherine K. Chan