BAGUIO, Philippines – Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona said further easing of the policy rates are on the table during the Monetary Board’s first meeting of the year.
Remolona’s remarks come after the country’s gross domestic product (GDP) growth settled at 5.6% in 2024, missing the government’s target range of 6%-6.5%.
“Right now we have a kind of a negative output gap. We’re growing at a little bit below capacity,” he said.
The output gap measures the difference between an economy’s actual output to its potential. A negative output gap means the Philippine economy is producing less than it could at full capacity.
Remolona said the further widening of the Philippines’ output gap may call for a rate cut. But the Monetary Board will also factor in the January inflation rate scheduled to be released on February 5.
“You have to see, say, where inflation is going. The next inflation number is [going to be released on] Wednesday, so we will look at that and we will look at projections for inflation over the next year, something called you know where we are relative to what we call the goldilocks state,” Remolona said.
A “Goldilocks” economy is the ideal economic ecosystem, often exhibited through steady economic growth, low unemployment, and stable inflation. It represents a balance between economic growth and monetary policy.
National Economic and Development Authority (NEDA) Undersecretary Rosemarie Edillon earlier said last year’s GDP print may encourage the BSP to continue its easing cycle.
“It has to be a rate that is supportive of growth. Whether how much that would be, we cannot preempt, but they know where we are coming from,” she said.
Finance Secretary Ralph Recto also believes the BSP will continue easing policy rates in 2025, but at a much slower pace.
The central bank began its easing cycle in August last year. It ended 2024 with the Monetary Board delivering a third rate cut of 25 basis points in December, bringing the benchmark rate to 5.75%.
The Monetary Board will hold its first policy meeting of 2025 on February 13. – Rappler.com