雅虎香港財經 Philippines Central Bank Tempers Hawkish Tone as High Rates Bite
(Bloomberg) -- A day after signaling the central bank’s readiness to pivot to monetary easing, Philippine central bank Governor Eli Remolona said he would like to see easier liquidity conditions as policy may be becoming tighter than necessary.
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“We’re beginning to see a negative output gap. That means it’s possible that we’re beginning to be tighter than necessary for taming inflation,” Remolona said in an interview with Bloomberg Television’s Yvonne Man and Stephen Engle on Friday.
The governor doubled down on his dovish tilt from Thursday when he said that the Bangko Sentral ng Pilipinas may cut its key rate by as much as a half-point this year in an easing cycle that may start as early as August. On Friday, he spoke about reducing banks’ reserve requirement ratio by 450 basis points during his six-year term, seemingly unfazed by the impact on the currency from the shift in his broadly hawkish tone since taking office in July 2023.
Remolona told Bloomberg TV that he’s “still hawkish, but less so than before” and the change “may put pressure on the peso, but so far it hasn’t.”
The Philippine currency, which had been among the worst-performing this quarter, fell another 0.4% to 57.69 per dollar at 11:48 a.m. in Manila, weakening along with regional peers. The BSP had sold dollars in small amounts recently and it’s ready to intervene if needed, Remolona said citing the nation’s ample dollar war chest.
The Philippine policymaker may be taking comfort in expectations that evidence of slowing demand and softening inflation in many parts of the world may soon usher in a global easing cycle including in the US. Nomura Holdings Inc. said in a note on Thursday that its “conviction level” for a Federal Reserve rate cut in July is rising.
At home, policymakers are anticipating that the worst of inflation is over while domestic demand has started to show strains from elevated prices and borrowing costs. Looking beyond the headline growth figures last quarter, the data showed signs of weakness in consumption, which makes up around 70% of output while investment growth also cooled.
In Southeast Asia, central banks have been paring back their hawkish stances as greater clarity around the Federal Reserve’s interest-rate path helps tame the strong dollar. Bank Indonesia, which hiked interest rates again in April, also hinted last week it was likely done with tightening.
On Friday, Remolona said banks’ triple R, which is currently at 9.5% can be slashed to 5% though it’s unlikely to happen while the central bank was still hawkish.
BSP’s last rate hike in October is still working its way through the economy and risks slowing the growth momentum, the governor said. While inflation remains the overriding factor in deciding monetary policy, Remolona said: “We don’t want to unnecessarily reduce output just to tame inflation. It’s a balancing act.”
Remolona was sanguine about the peso’s moves, saying it was primarily driven by the dollar’s resurgence. Recent intervention in FX, he said, was to keep markets orderly and not to affect the value of the peso.
“If there’s stress then we might come in. Stress means large offer sizes, high volatility,” said the governor.
--With assistance from Andreo Calonzo, Andy Clarke, Manolo Serapio Jr. and Karthikeyan Sundaram.
(Updates with further details throughout.)
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