MANILA (April 8): The Philippine central bank kept its benchmark rate steady at 6.5% for a fourth straight meeting on Monday and signalled that interest rate cuts would start later rather than at an earlier stage due to upside risks to inflation.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona told a press briefing upside risks to inflation, driven mainly by an increase in rice prices have "become worse" making policymakers "somewhat hawkish than before".

"We're not gonna do it (cut rates) by the third quarter. We may do it down the road", the governor said, emphasising that the central bank is contemplating easing policy and not tightening any further.

Remolona said unfavourable developments around inflation and growth could mean a rate cut is delayed to the first quarter of next year.

ING economist Nicholas Mapa said the central bank would likely keep interest rates on hold until the second half of the year and take its cue from the US Federal Reserve (Fed) on the policy-easing timeline.

"With the Fed possibly pushing back the timing of its rate cuts to the second half of the year and Philippine inflation projected to breach the upper end of the BSP's target in the near term, we believe the central bank will extend its hold until the Fed finally cuts its own policy rates and headline inflation cools," Mapa said in a note to clients.

All 21 economists in a Reuters poll had expected the BSP to keep is target reverse repurchase rate unchanged on Monday. In the same March 27-April 3 poll, 12 of 19 economists forecast it to remain there at end-June, while seven predicted a 25-basis-point cut to 6.25% either in May or June.

Taking into account last month's acceleration in annual inflation to 3.7%, the central bank raised its risk-adjusted consumer price forecast to 4.0% for 2024 from 3.9% previously, but kept next year's at 3.5%.

The forecasts were within the central bank's 2% to 4% target for both years.

The Philippine peso hardly budged after the central bank's decision, while stocks recouped some of their early losses to trade marginally lower.

Last week, the Philippines lowered its growth target for the year to 6.0% to 7.0% from 6.5% to 7.5%, with the target range for 2025 narrowed to 6.5%-7.5% from 6.5%-8.0%, due to elevated inflation and an anticipated slowdown in the global economy.

Rice inflation jumped to its fastest pace in 15 years in March, accounting for nearly half of the price uptick for the month.

The central bank, which next meets on May 16, has raised rates by 450 basis points since May 2022, including in an off-cycle hike in October.

"If we see some good news, weakening inflation and somewhat weak growth, we could (cut rates) by the third quarter. If it is opposite, we would ease in Q1 2025," governor Remolona said.