The Philippine central bank hinted at an interest rate reduction in the third or fourth quarter of this year after policymakers decided to leave the benchmark interest rate unchanged for the fifth straight session on Thursday.

The Monetary Board of the Bangko Sentral ng Pilipinas, governed by Eli Remolona, maintained the target reverse repurchase rate at 6.50 percent.

Accordingly, the interest rates on the overnight deposit and lending facilities were maintained at 6.0 percent and 7.0 percent, respectively.

At the press conference, Remolona said, “We are somewhat less hawkish than before.”

The BSP estimates inflation to settle close to the upper end of the target range. The inflation outlook for this year was lowered to 3.8 percent from 4.0 percent, while the projection for 2025 was raised to 3.7 percent from 3.5 percent.

Based on the latest GDP data, the central bank said the expected path for domestic output growth over the medium term remains largely intact, even as recent indicators point to continued moderation under tight financial conditions.

Capital Economics economist Gareth Leather said the central bank will start to loosen policy soon. The bank will cut rates by a quarter-point in August, with further loosening later in the year, the economist added.

“Despite this recent shift in tone from the previously hawkish Remolona, we hold on to our previous expectation that the BSP can only cut policy rates ASAF – As Soon As the Fed (does)”, said ING economist Nicholas Mapa.