Philippine central bank keeps rates steady, flags delay to cuts

MANILA: The Philippine central bank kept its benchmark rate steady at 6.50% for a fourth straight meeting yesterday and signalled that interest rate cuts would start later rather than at an earlier stage due to upside risks to inflation.

Bangko Sentral ng Pilipinas Goveror Eli Remolona told a press briefing upside risks to inflation, driven mainly by an increase in rice prices have “become worse” making policymakers “somewhat hawkish than before”.

“We’re not gonna do it (cut rates) by the third quarter. We may do it down the road,” the governor said, emphasising that the central bank is contemplating easing policy and not tightening any further.

Taking into account last month’s acceleration in annual inflation to 3.7%, the central bank raised its risk-adjusted consumer price forecast to 4% for 2024 from 3.9% previously, but kept next year’s at 3.5%.

Rice inflation jumped to its fastest pace in 15 years in March, accounting for nearly half of the price uptick for the month.

The central bank, which next meets on May 16, has raised rates by 450 basis points since May 2022, including in an off-cycle hike in October.

Meanwhile, Thai Prime Minister Srettha Thavisin said his country’s central bank should cut its key interest rate by at least 25 basis points this week, as the government forges ahead with a stimulus scheme worth 500 billion baht (RM65 billion) to spark economic activity.

The flagship “digital wallet” programme will be rolled out in the final quarter of the year but will not be financed by a loan bill, Srettha said in an interview with Reuters on Sunday.

He said the funding sources will be finalised at a meeting tomorrow, the same day as the central bank’s monetary policy meeting.

“(The economy) will be stimulated, and hopefully by the first quarter of next year, we will see some results.”

The central bank has so far resisted government pressure to ease policy.

It held the key interest rate steady at 2.50% in February, the highest level in more than a decade, in a split vote.

Some economists expect a rate cut tomorrow.

Srettha said annual growth in Southeast Asia’s second-largest economy may have slowed to below 1% in the first quarter of 2024 from annual growth of 1.7% in the previous three months.

He also said the government plans to boost tourism by hosting multiple large-scale events and creating tax incentives to draw in more tourist numbers and dollars.

“Next year will be the biggest ever year for Thai tourism.”

Srettha said the government is exploring the use of nuclear power for electricity generation in the long term as part of a plan to diversify to clean energy sources and draw in investment. – Reuters