(Bloomberg) — The Philippine central bank pledged to maintain a “measured approach to monetary policy easing” as upside risks to inflation remain even after meeting the annual target for the first time in three years in 2024.
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“The within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy,” Bangko Sentral ng Pilipinas said in a statement Tuesday after the statistics agency reported that price gains averaged 3.2% in 2024. That’s well within the government’s 2% to 4% goal.
“Nonetheless, the monetary authority will continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors,” the BSP said. Consumer prices rose 2.9% from a year ago in December, the fastest in four months and above all but one estimate among 21 economists in a Bloomberg News survey.
The core price gauge that strips volatile food and energy prices also quickened to 2.8% in December, the Philippine Statistics Authority said Tuesday. Potential transport and electricity rate increases, geopolitical tensions and the impact of adverse weather pose upside risks, prompting caution in one of the first central banks in the region to cut borrowing costs.
The BSP last year lowered the key rate by a total 75 basis points, delivering its first cut ahead of the Federal Reserve. It capped 2024 with a third quarter-point rate cut in December, as inflation remained on target and economic growth slowed, with Governor Eli Remolona signaling last month that monetary easing can continue at its first policy meeting this year on Feb. 20.
In a separate statement on Tuesday, Remolona struck a cautious tone, saying authorities won’t be complacent even after meeting the inflation target last year. “It’s always good to be prepared,” President Ferdinand Marcos Jr. was quoted in the BSP statement as saying after the central bank warned that prices of certain commodities may rise.
Price increases averaged 6% in 2023 and 5.8% in 2022 — breaching the target band, driven mainly by supply disruptions. That prompted the BSP to implement its most aggressive monetary tightening in two decades that took borrowing costs to a 17-year high.
The central bank “remains ready to respond when necessary, guided by its data-dependent approach,” it said in Tuesday’s statement. Incoming US President Donald Trump’s threat to broadly impose tariffs also pose potential price risks.
