BSP governor says February rate cut 'not likely'

In statements made to the press, BSP Governor Eli Remolona [link] said that due to the “numbers we are seeing” a rate cut “is not likely (on) February 15”, which is the next scheduled meeting date for the BSP’s Monetary Board. Mr. Remolona underlined the need to maintain policy settings that were sufficiently tight to handle the evolving risks to inflation posed by geopolitical tensions (Ukraine/Palestine/Houthi militants) and a prolonged El Niño weather event. 

MB bottom-line: Mr. Remolona’s comments have been consistent on the topic of inflation and the need for the BSP to be conservative in its application of rate adjustments. This is in general alignment with the American approach, which has largely played out according to the US Federal Reserve Chairman’s mantra of “higher for longer”. What interests me more is the recent slip in the value of the Philippine Peso relative to the US Dollar. My last check of the official rate showed a P56.36:$1 exchange rate, which is a significant shift from the mid-P55:$1 rate that we saw through most of November and December. Will the rate continue to climb, and if it does, will it challenge that P57:$1 line that Mr. Remolona had previously tried to defend for psychological reasons? Remember he recently said that the BSP would intervene less often in the foreign exchange market. Mr. Remolona said that “intervention should only happen during times of stress”, and that the BSP had been “intervening a bit too much.” Like Mike Tyson said, “Everyone has a plan until they get punched in the mouth.” Will the BSP be pressured to act if the currency slips further? 

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