BSP chief: ‘Dangerous’ to cut rates faster than Fed

April 26, 2023 - 4:32 PM
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Bangko Sentral ng Pilipinas Governor Felipe Medalla poses for a photograph in his office at Manila, Philippines, November 18, 2022. (Reuters/Eloisa Lopez/File Photo)

 The Philippines’ central bank considers it “dangerous” to cut interest rates faster than a policy easing by the U.S. Federal Reserve, its governor said on Wednesday.

While Philippine inflation will decelerate to below 4% late this year and come in closer to 3% in 2024, the Bangko Sentral ng Pilipinas (BSP) aims to maintain its interest rate differential with the Fed, Governor Felipe Medalla told reporters on the sidelines of a central bank event, ahead of the BSP’s rate-setting meeting on May 18.

“If inflation in the U.S. is sticky and cuts are slow, it is very dangerous for the Philippine central bank to cut faster than the U.S.,” Medalla said.

Philippine inflation slowed for a second straight month in March to 7.6%.

Gross domestic product could have expanded “in the neighborhood of 6%” in the first quarter, Medalla said.

A Philippine government inter-agency panel this week maintained its economic growth target of 6.0% to 7.0% this year on robust domestic economic activity amid global headwinds.

—Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Kanupriya Kapoor