At the core of Nomura’s conservative forecast is the expectation that the BSP would “adhere more strictly to its inflation targeting framework” and be “more driven” by the latest data on inflation. — Bloomberg
MANILA: There’s only a 15%t chance that the Bangko Sentral ng Pilipinas (BSP) will resort to a forceful half-point rate cut at its hotly anticipated policy meeting today, according to Nomura Global Markets Research, citing the need for a “calibrated” shift to easier monetary setting.
In a commentary, the Japanese investment bank instead assigned an 80% probability that the powerful Monetary Board would opt for a modest quarter point cut at its meeting today.
This suggests that there’s only a 5% possibility of the BSP hitting the pause button on its easing action.
At the core of Nomura’s conservative forecast is the expectation that the BSP would “adhere more strictly to its inflation targeting framework” and be “more driven” by the latest data on inflation.
Nomura also said that the central bank is mindful of ongoing geopolitical tensions that could push up oil prices and mess up with the inflation outlook.
“The policy statement and comments in the press briefing are therefore also likely to remain dovish, with BSP continuing to see scope to deliver more rate cuts.
“While BSP could raise its inflation 2024/25 forecasts, taking into account increases in global crude oil prices, these are likely to be assessed by BSP as remaining ‘target-consistent,’” the bank said.
The latest data showed inflation retreated to a four-year low of 1.9% in September, with much of the slowdown coming from softer food price growth, which sharply moderated to 1.4%.
That put the year-to-date headline inflation rate to 3.4%, well within the 2% to 4% target range of the central bank.
The BSP is at a point where it has to unwind its most forceful tightening in two decades, which sent the benchmark rate to its highest level in 17 years.
Cutting borrowing costs is seen necessary amid market predictions that the economy may grow below the government’s target for this year after consumption showed signs of weakening. — The Philippine Daily Inquirer/ANN
