Inflation rate will track a downward path in the coming months despite the Monetary Board’s decision to cut key interest rates Thursday, Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said.
Remolona, who is also the chairman of the policy-making Monetary Board, said the bank had considered factors on possible inflation resurgence in cutting the overnight borrowing rate by 25 basis points to 6.25 percent.
“All the factors that we considered that are risky on the high side seem very unlikely. So, I think we’re very confident that inflation is on its way down,” Remolona said in an interview with CNBC.
He said inflation was well behaved, consistently reflecting the projected figures of the central bank.
“Our inflation numbers have been well behaved in the sense that they’ve been consistent with our projections. Even the July number was expected—4.4 percent partly on base effects. If you take out the base effect, it would go down to 4.1, which is still outside our target range, but still it wasn’t an unexpected number,” he said.
Remolona reiterated that there might be another rate cut this year, which would move the gross domestic product growth up.
“The relevant policy horizon is 2025, because our monetary policy transmission mechanism has long lags. So we cut yesterday, we might cut again sometime during the year, and then we hope that has a significant effect on growth,” he said.
Remolona also said the Monetary Board was not worried too much about the depreciation of the peso against the US dollar, following the rate cut decision.
“The impact of exchange rate depreciation on Philippine inflation is very modest. So we don’t worry too much about a depreciation of the peso,” he said.
