Philippine Central Bank Chief Sees April Rate Cut, Modest Tariff Impact

(Bloomberg) -- The Philippine central bank will likely resume monetary policy easing next month, Governor Eli Remolona said, with US tariffs likely to have only a “modest” impact on the Southeast Asian nation’s economy.

The Bangko Sentral ng Pilipinas chief said there’s a bigger chance for a rate cut during the April 10 meeting, and favorable inflation data for March will push monetary authorities more towards that. 

“We’ve been on an easing cycle for a while now — we just took a pause,” Remolona said in an interview with Bloomberg News on Wednesday, referring to the central bank’s decision to hold rates in February. 

The BSP will likely deliver a total of 50 basis points in rate reductions this year, the governor told Bloomberg Television’s Haslinda Amin. He added that 75 basis points in cumulative cuts is also possible if economic growth is much slower than expected.

Policymakers globally are showing caution as US President Donald Trump’s rollout of tariffs threatens global trade, with Bank Indonesia holding its key rate unchanged Wednesday despite an easing bias, and the Bank of Japan doing the same as it gauges the impact of Trump’s tariffs. But the Philippines has fared better than other emerging markets, with the peso outperforming regional peers in the past month, and its main stock index gaining 3%.

The Federal Reserve held its benchmark interest rate steady for a second straight meeting on Wednesday amid mounting concerns that the economy is slowing and inflation could stay stubbornly high.

The BSP governor said US tariffs will likely have a “modest” effect on the Philippine economy, as its exports are largely in the service sector. A 6% growth in the nation’s economic output this year is “very feasible,” even as the US economy will likely slow down, he added.

The Philippine central bank appears to have leeway to resume easing, with inflation slowing sharply in February and staying within the 2%-4% goal for seven consecutive months. Below-target economic growth in 2024 and the peso’s slight gains so far this year also add to the case for further rate cuts.

Read: Duterte’s Swift Descent From ‘Punisher’ President to Inmate 

Still, investors are keeping an eye on domestic politics after President Ferdinand Marcos Jr. facilitated the arrest of his predecessor Rodrigo Duterte, who is now in the Netherlands facing International Criminal Court allegations of crimes associated with his war on drugs. The former leader retains widespread support and his daughter, Sara Duterte, is Marcos’ vice president, though she was impeached by the House of Representatives and is set to undergo a Senate trial in July.

--With assistance from Ditas Lopez and Alex Chandler.

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