THE recent decision of the United States Federal Reserve to maintain its interest rates is not enough assurance that rate cuts are coming, according to the Bangko Sentral ng Pilipinas .
“The most recent numbers [show] that the inflation rate is declining. Kitang-kita mo yung [You can clearly see the] trend. Oxford Economics expects policymakers in the Philippines and South Korea to wait until the first quarter of 2024 or earlier to ease monetary policy. One thing that Medalla noted was that given the narrow differential between US interest rates and Philippine interest rates, this could lead to a “knee-jerk” reaction for the peso to depreciate.
Medalla said if the peso depreciates based on this “knee-jerk” reaction, it will be difficult for the Philippines since inflation remains high. It can be noted that the country is a net food and oil importer. Earlier, Philippine Statistics Authority data showed that inflation slowed in May to 6.1 percent from 6.6 percent in April 2023, but was still higher than the 5.4 percent posted in May 2022.