April rate cut on the table

AN April rate cut remains possible as monetary authorities await more data to determine whether to resume easing policy, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said on Tuesday.

While lower-than-expected February inflation has fueled speculation about a potential rate cut next month, the BSP chief said the final decision would be made on April 10, which would give the Monetary Board the benefit of March inflation data to be released on April 4.

The BSP website still states that the central bank's policymaking body will be meeting on April 3. A change will not be the first for this year — last month's Feb. 13 meeting was moved up from Feb. 20 to allow Remolona to attend a Financial Action Task Force meeting in Paris.

Remolona, who said that the central bank was still recalibrating its models to factor in uncertainties, would also depend on other indicators.

"So there's the baseline scenario, which is kind of saying ... we'll cut by these many times the rest of the year," he said.

"Then we have a hawkish scenario, which means fewer cuts. And then there's the dovish scenario, which means more cuts than the baseline."

"So we compare those three scenarios and how we see inflation evolving, how we see growth evolving. So it's a balancing act between inflation and growth. And so we have to weigh the different factors."

The BSP's benchmark rate currently stands at 5.75 percent after the Monetary Board surprised the market last month by keeping key rates unchanged.

Remolona has already said that monetary authorities would maintain a measured approach to setting policy.

"We think we're on track, more or less on track, we stay with baby steps, which means twenty-five basis points at a time," he said on Tuesday.

"If things look much worse than we thought — what we call a hard landing — then maybe 50 basis points or even more. But as long as we're more or less on track, it will be 25 basis points at a time," he added.

Aside from interest rates, Remolona hinted at the possibility of further cuts in bank reserve requirement ratios this year, saying, "For me, 5.0 percent is still high. But I'm just one vote out of seven on the Monetary Board."

While he acknowledged that the RRR could eventually go to zero, similar to the United States, he stressed the need for a gradual approach to prevent excessive liquidity from flooding the domestic financial system.