Philippine central bank rejects rate-cut call that weakened peso

PHILIPPINE central bank governor Eli Remolona pushed back against the rate cut outlook given by the country’s finance chief, describing it as “too aggressive”.

Finance Secretary Ralph Recto last week said the central bank could deliver 150 basis points in rate reductions to 2025. But Remolona said at a forum in Manila on Tuesday (Jun 4) that a rate reduction of that magnitude is only applicable when the economy hits a hard landing.

Given the current growth trajectory of the Philippine economy, where it remains among the region’s fastest-growing in the first quarter, the call by Recto – who’s also a member of the rate-setting panel – “would be too aggressive”, he said.

Remolona also signalled that the Bangko Sentral ng Pilipinas (BSP) was on track to possibly cutting its key rate by 25 basis points in August and probably by another quarter-point more later this year, whether or not the Federal Reserve pivots to easing. He indicated that the path to further reductions will be gradual against the backdrop of resilient growth and a depreciating peso.

Since Recto’s 150-basis-points view, the peso has shed about 1 per cent against the US dollar, extending losses that have turned it to the region’s worst performer this quarter. While the currency is within striking distance of its 59-record low, Remolona said authorities are not too concerned about a particular level.

“We are worried more about how it gets to where it’s going,” the governor said. There would be times, he said, that the BSP would “try to guide the market by occasionally expressing our own view on where it should go” but there’s no target level.

Recently, the central bank also sought “to project a single voice to the public when communicating the intention and direction of monetary policy”. The BSP posted a notice on its website last week that it would adopt a seven-day “quiet period” before every rate decision where only the governor would be authorised to speak.

On the ghost employee scandal, Remolona said he was “flabbergasted” that it could happen at the BSP. He said the central bank acted as fast as it could and it’s ensuring that there will not be a repeat.

The BSP is investigating a whistleblower’s report that several staffers in the offices of two Monetary Board members had not been reporting for work for extended periods of time but were receiving salaries. BLOOMBERG