The Governor of the Bangko Sentral ng Pilipinas (BSP) [link], Eli Remolona, said on Friday that he thinks there’s “maybe two more cuts” coming this year for interest rates, though he was quick to clarify that they’re “not necessarily consecutive”. He reiterated his interest in slow-drip rate cuts in small increments (25-basis points per cut), but admitted that this macroeconomic environment is “new territory for most central banks, [and] that’s the most uncomfortable part.” The Monetary Board’s next opportunity to make a rate decision will be on June 19. Mr. Remolona added, “So far, the hard data says we have plenty of room to cut, especially because inflation is low.”
MB BOTTOM-LINE: A local economist, Enrico Villanueva (RIP), was increasingly critical of the BSP’s miserly approach to rate cuts, despite data that clearly showed a great reduction in inflation and a GDP that was still under-performing and in need of some stimulus. I don’t want to put words in his mouth, because Mr. Villanueva was far more educated on these matters than I am, but I think he’d be even louder about the need for the BSP to get more aggressive. I know that for me personally, I don’t want to hear anything about reserve rate cut gifts to bankers in the same breath as all this overly-cautious talk about all the terrible things that could happen if the BSP were to move too quickly in the right direction. We’re actually quite accustomed to feeling all this painful inflation and hearing all the reasons to clutch our pearls about it getting worse. Hasn’t stopped the BSP from doling out massive RRR cuts or signaling even bigger cuts over the next few years. Where’s that aggression on our behalf?
