Geopolitical tensions and potential policy shifts in the United States are prompting caution among Philippine monetary authorities regarding interest rate cuts. Jonathan Ravelas, a senior adviser at Reyes Tacandong & Co., warned that aggressive monetary easing could exacerbate inflationary pressures.
During the Chamber of Thrift Banks General Membership Meeting, Ravelas emphasized that current geopolitical risks, coupled with former President Trump's intentions to raise tariffs on US imports, could lead to increased prices in the international market.
Ravelas noted that the Bangko Sentral ng Pilipinas (BSP) may maintain its policy rates this month, with expectations of a 25-basis-point reduction later this year. Analysts predict a total rate cut of 100 basis points in 2024, contingent on inflation trends.
Concerns about the peso's stability were raised, with Ravelas forecasting a potential depreciation to P62 against the US dollar if the US Federal Reserve raises interest rates. He recalled that during Trump's first presidency, the peso weakened significantly against the dollar.
For 2024, Ravelas projected GDP growth at 5.8 percent, inflation at 5.6 percent, and the peso closing at P55.5 to the dollar. His scenarios indicated varying outcomes based on geopolitical developments and US monetary policy actions.
Looking ahead to 2025, Ravelas estimated GDP growth of 6.3 percent, with inflation and policy rates reflecting broader economic conditions and external factors.