Pantheon Sees BSP Rate Cuts Before Year End

• Pantheon sees BSP rate cuts before year end, see below.

"The BSP remains of the view that inflation will return to the 2%-to-4% target range in Q4 this year, which is a more than reasonable baseline from our standpoint, though we see an outside chance of this taking place in Q3, barring no unexpected shocks. Our core view still is that the Bank will start to roll back partially its tightening measures, starting with 50bp worth of rate cuts in Q4. Mr. Medalla believes that it’d be “hard” for the BSP to start cutting if the Fed isn’t doing so as well. We doubt that Fed policy will be a barrier to BSP easing, however, as our house view is for the Fed to cut by 25bp in Q3, before pursuing 50bp more in Q4. Philippine economic momentum clearly is ebbing, and we believe that full year GDP growth this year will come in at 5.5%, down from 7.6% last year, and more than a percentage point below the pre-pandemic pace."