Inflation, GDP to take center stage in Monetary Board meeting Thursday

The latest inflation and economic growth data will take center stage when the Monetary Board (MB) meets later this week, the Bangko Sentral ng Pilipinas (BSP) said Tuesday.

“The July inflation rate, the Q2 GDP numbers, and a host of other developments locally and abroad, will be considered as the MB deliberates on the appropriate policy stance on August 8,” BSP Governor Benjamin Diokno said.

The Philippine Statistics Authority has reported inflation settled at 2.4% in July, the slowest in 31 months since it registered at 2.2% in December 2016.

“2.4% inflation rate is the midpoint of BSP’s target range of 1.8 to 3.0% forecast for July. Hence, it is not a surprise at all,” said Diokno.

The second quarter gross domestic product (GDP) results will be released this Thursday, August 8.

With inflation rates within forecast range, analysts widely expect the BSP to implement more interest rate cuts this year after policy rates were lowered by 25 basis points in May.

“We think the market will remain conducive to bond investments in the second half as we anticipate the BSP to further cut the reserve requirement by another 2% and potentially reduce policy rates by 50 basis points from its current levels as inflation continues to drop,” First Metro Investment Corp. (FMIC) president Rabonni Arjonillo said in July.

The overnight borrowing rate now stands at 4.5%, the overnight lending at 5.0%, and the overnight deposit at 4.0%.

A cut in interest rates should precede a cut in the reserve requirement ratio—currently at 16%, Diokno said last month. —VDS, GMA News