Sans ‘hard landing,’ BSP not keen on sharp rate cut
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THE WORLD | A16
BIDEN SAYS HAMAS SUFFICIENTLY DEPLETED; ISRAEL LEADERS DISAGREE, CASTING DOUBTS OVER CEASEFIRE
ILIPINOS looking for better interest rates at which to borrow may have to wait longer before the Bangko Sentral ng Pilipinas (BSP) brings down rates by over 100 basis points (bps). Finance Secretary Ralph G. Recto earlier expressed confidence that the Monetary Board could reduce key policy rates by 150 basis points (bps) within two years. (https:// businessmirror.com.ph/2024/05/29/ recto-sees-rates-cut-by-total-150-bpswithin-2-years/) However, the chairman of the Monetary Board, BSP Governor Eli M. Remolona Jr. said this may be too aggressive given the current trajectory of the country’s GDP growth. He said it is possible to bring down key rates by 50 bps this year and 100 bps next year if there was a risk of a “hard landing.” “Given the present trajectory of growth,
it would be too aggressive,” Remolona told reporters on Tuesday. He stressed that only when there is a “hard landing” can the Monetary Board consider an aggressive rate cut. Remolona said in a bid to tame inflation, inflation-targeting central banks like the BSP would raise interest rates. However, in times when the increase in policy rates becomes bad for economic growth, central banks would consider easing monetary policy but cutting key interest rates. “In taming inflation, you don’t want unnecessary loss of output,” Remolona said. “Kung minsan hindi mo maiwasan na may konting loss of output kasi hindi naman precise yung mga namin calculations. Pero kung mukhang malaki ang mga mawawala, we have to react to that [There are times raising rates could lead to losses
in output because our calculations are not precise. But if it looks like there will be a significant loss in output growth, we have to react to that].” Remolona said earlier the monetary authorities may start gradually cutting policy rates by August. However, given recent developments, this may or may not come ahead of the actions of the US Federal Reserve. Initially, expectations by analysts said the Federal Reserve could cut rates by September this year. However, Remolona said there are now estimates that the Federal Open Market Committee (FOMC) could cut as early as next month. “Pwede tayo mauna. Depende [sa kanila]. Kung matigas ang ulo ng inflation nila, baka hindi sila mag-cut [We may still cut interest rates ahead. It depends on them (US Federal Reserve). If their inflation is sticky, they may
not cut (rates)],” Remolona said. The timing of the reduction of key policy rates by the US Federal Reserve matters for the Philippine peso, which closed at P58.71 to the greenback on Tuesday. New York-based Global Source Partners said if the weakness of the peso extends to a year at the current magnitude, and with an exchange rate pass-through of 0.08 percentage point (ppt) for every peso depreciation, they said inflation could increase by 0.24 ppts. “This means the market may even be more adaptive to the central bank statement’s forward guidance rather than to the actual stance of monetary policy as defined by its policy rate. This demands greater circumspection on the part of our monetary policy makers,” Global Source Partners analyst Diwa Guinigundo said. Cai U. Ordinario
A broader look at today’s business Q
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Wednesday, June 5, 2024 Vol. 19 No. 232
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PHL CUTS RICE TARIFFS TO TEMPER INFLATION By Samuel P. Medenilla @sam_medenilla
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RESIDENT Ferdinand R. Marcos Jr. is set to issue a new Executive Order (EO), which will slash rice tariffs to 15 percent amid the soaring international prices of the staple. The government expects the tariff reduction to stabilize rice prices in the next four years and temper inflation. The tariff reduction for rice is part of the Comprehensive Target Program (CTP) for 2024-2028, which was approved by the National Economic and Development Authority (Neda) Board led by the President, during its 17th Board meeting last Monday. “For rice, one of the most critical components of Filipino households’ consumption basket, the Neda Board agrees to reduce the duty rate to 15 percent for both in-quota and out-quota rates from 35 percent until 2028. This decision aims to lower the price of rice further and make it more affordable,” Socioeconomic Planning Secretary Arsenio M. Balisacan said in a press briefing in Malacañang on Tuesday.
“The president will issue an executive order to implement this new tariff program,” he added.
‘Thin market’ BASED on the latest market monitoring of the Department of Agriculture (DA), the price of imported well-milled rice ranges from P52 to P55 per kilogram (kg) while the regular-milled variety sells for as much as P51 per kilo. Figures recorded by the DA on May 31 also showed that local commercial well-milled rice sells for P48 to P55 per kg while the price of the regular-milled variant ranges from P45 to P52 per kg. The Philippine Statistics Authority (PSA) said rice contributed to about 2 percentage points or over 50 percent to headline inflation in the last three months. See “Inflation,” A
GAPS IN CONNECTIVITY KEY TO POVERTY RATE CUTSWB By Cai U. Ordinario @caiordinario
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F the government wants to bring down the poverty rate to single-digit levels by the time the President steps down from office, the current administration must address the gaps in physical and digital connectivity, the World Bank said. In its latest Philippine Economic Update, the Washingtonbased lender maintained its latest forecasts for the country’s GDP growth at 5.8 percent this year and 5.9 percent next year
and in 2026. However, bringing down the country’s poverty incidence to 9 percent by 2028 would require more effort to ensure that the country’s “economic and social transformation” is inclusive and will help create a “resilient society.” “ The country still faces challenges to ensure that the gains from robust economic growth are distributed evenly,” the World Bank said in its latest report. See “Gaps,” A
VOLCANIC INTERRUPTION Passengers await their flight announcements at NAIA Terminal 2 in Pasay City on Tuesday, June 4, as domestic flights in and out of Manila and other domestic hubs were canceled due to Mount Kanlaon’s eruption on June 3, 2024. Mount Kanlaon, located in Negros Island, is an active stratovolcano known for its periodic eruptions. Alert level 1 was raised to alert level 2 by the Philippine Institute of Volcanology and Seismology, prompting precautionary measures for public safety in nearby areas. NONIE REYES
Kanlaon erupts; 29 flights halted, DOH flags ashfall
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OUNT Kanlaon, an active volcano on Negros Island, erupted for six minutes Monday night, producing a 5,000-meter plume, the Philippine Institute of Volcanology and Seismology (Phivolcs) reported. The steam-driven or phreatic explosion occurred at the summit vent at 6:51 p.m., prompting Phivolcs to raise Alert Level 2, which indicates current unrest driven by shallow magmatic processes that could eventually lead to further explosive eruptions or even hazardous magmatic eruptions. In the latest Volcano Bulletin issued 12 midnight on June 4, Phivolcs reported 43 volcanic earth-
quakes. Ground deformation was also observed in some parts of the volcano. The voluminous emission of some 5,000-meter tall plume toward southwest and southwestward drift was also observed. On Tuesday, as a precaution, 29 flights from the Ninoy Aquino International Airport (NAIA) were canceled, the Manila International Airport Authority reported. The f lights include ManilaBacolod-Manila, Bacolod-Manila and Iloilo-Manila flights of Cebu Pacific; Manila-Cebu-Manila, Manila-Bacolod-Manila and ManilaIloilo-Manila flights of Air Asia; See “Kanlaon,” A
PESO EXCHANGE RATES Q US 58.5320 Q JAPAN 0.3750 Q UK 74.9561 Q HK 7.4855 Q CHINA 8.0831 Q SINGAPORE 43.4859 Q AUSTRALIA 39.1403 Q EU 63.8291 Q KOREA 0.0427 Q SAUDI ARABIA 15.6073 Source:
BSP 4 June 2024