(Bloomberg) --
The Philippines may cut its key interest rate in the first quarter of the year, with a pickup in December inflation and heightened Middle East tensions unlikely to derail the central bank's plan to unwind past aggressive monetary tightening.
Governor Benjamin Diokno said the Bangko Sentral ng Pilipinas may resume its easing campaign with a 25-basis point cut to its key rate within the first three months of the year. The bank lowered rates by 75 basis points in 2019 after raising them by 175 basis points the year before, with Diokno noting that 100 basis points of those 2018 hikes have yet to be reversed.
“We don't want that our real interest rate is going to be much higher than the rest of the world,” Diokno told journalists Tuesday in Manila. “We don't like hot money.”
Data Tuesday showed consumer prices rose 2.5% in December from a year earlier, compared to November's 1.3% rise. The 2.5% average gain for all of 2019 remained well within the central bank's 2%-4% target range.
Philippine Inflation Tops Median Forecast by Half a Percentage Point in December
Diokno also cautioned against alarmism over rising tensions between the U.S. and Iran, reiterating that global oil prices would need to stay around $90 per barrel to alter the inflation forecast. He downplayed any impact on remittances -- a mainstay of the Philippine economy -- as most Filipinos working in the Middle East are in Saudi Arabia, away from the center of the conflict.
--With assistance from Ditas Lopez and Cecilia Yap.
To contact the reporter on this story: Andreo Calonzo in Manila at acalonzo1@bloomberg.net
To contact the editors responsible for this story: Cecilia Yap at cyap19@bloomberg.net, ;Nasreen Seria at nseria@bloomberg.net, Michael S. Arnold, Karl Lester M. Yap
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