The opportunity for the Philippine central bank to start easing the key interest rate during the latter part of 2024 is becoming limited, with the increasing possibility that inflation might exceed its target for a third consecutive year, according to Philippine central bank governor Eli Remolona.

“The upside risks have become worse than before, and that’s the reason we’ve stayed hawkish. The policy rate is on the tight side. So by being hawkish, what we mean is we will stay where we are,” said the governor during an interview at the Bangko Sentral ng Pilipinas (BSP) in Manila.

Monetary easing will likely get underway in Q1 next year and the cuts won’t be “huge”, to bring the benchmark nearer to the neutral rate of around 6% from the present 6.5%, the governor added.

As it stands, the chance inflation my surpass the central bank’s 2-4% target again in 2024 are “over 56%” and “that’s a reason to be hawkish,” Remolona said. “That has to change significantly before we decide to cut,” he added.

Since assuming office in July 2023, the governor, who has previous experience at the Bank for International Settlements and the Federal Reserve of New York, has generally taken a more cautious approach, Bloomberg reports.

Despite the BSP’s most vigorous tightening efforts in two decades, which have pushed the key rate to a 17-year peak, price risks in the country have continued.

Remolona oversaw the latest rate hike in October aimed at curbing inflation. The robust economic growth, remaining one of the fastest in the region, provided some support.

Furthermore, an “extraordinarily weak” economy increases the necessity for a rate cut, according to the governor. However, the central bank’s latest growth estimate for this year was better than last year’s 4.5% forecast, he said.

The Philippines is predicted to grow by 5.8% in 2024, as per an average estimate in a Bloomberg poll of economists, after it increased by 5.5% last year.