Philippines central bank chief signals cautious path on rate cuts

MANILA (Reuters) - The Philippine central bank is taking a cautious approach to policy easing this year to avoid overheating the economy and reigniting inflation, which has been on a downward trend, Governor Eli Remolona told Bloomberg TV on Friday.

The Bangko Sentral ng Pilipinas resumed its easing cycle on Thursday, cutting its benchmark interest rate by 25 basis points to 5.50% and signaling further reductions to come — in "baby steps" — as it seeks to support the economy amid global uncertainties.

"We don’t want to overdo it,” Remolona said. "If we overdo it, then we start to exceed capacity, then inflation comes back. So we want to get to the neutral rate smoothly.”

The BSP uses several estimates for the neutral rate — the theoretical level at which monetary policy neither stimulates nor restricts growth — but typically relies on a midpoint, which Remolona said was at around 2%.

He also ruled out inter-meeting rate cuts, noting policy decisions are typically made at scheduled meetings, which occur every other month. Four meetings remain this year, with the next set for June 19.

Remolona also said the Philippines has not been intervening in the foreign exchange market more than usual this week and was looking at diversifying foreign reserves, not reducing them.

"We have the right mix of assets in reserves," Remolona said

(Reporting by Mikhail Flores and Karen Lema; Editing by Martin Petty)

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