The Bangko Sentral ng Pilipinas (BSP) could start rate cuts by the first quarter of next year, with inflation expected to continue to ease, according to UK-based think tank Pantheon Macroeconomics.

In a report, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and senior Asia economist Moorthy Krshan said they are sticking to their base case that the BSP will slash rates next year by at least 100 bps (basis points).

'The first cut could come as early as Q1 (first quarter),' the think tank said.

At its last policy meeting last Thursday, the BSP kept the target reverse repurchase rate unchanged at 6.5 percent.

BSP Governor Eli Remolona Jr. said risks to the inflation outlook still lean on the upside.

'Key upside risks are associated with potential pressures emanating from higher transport charges, increased electricity rates and higher oil prices,' he said.

He also said the impact of a relatively weak global recovery, as well as government measures to mitigate the effects of El Niño weather conditions could lower the central forecast.

The Pantheon economists said retaining a 'sufficiently tight' stance and having rate cuts, however, are not mutually exclusive.

'Policy will continue to tighten next year - in real terms - even if the BSP heeds our call for 100 bps of cuts, as we reckon average inflation will fall substantially in 2024, to 2.8 percent,' the think tank said.

Last November, inflation eased to a 20-month low of 4.1 percent from October's 4.9 percent due mainly to slower food price upticks.

In the January to November period, inflation averaged 6.2 percent, still above the BSP's two to four percent target.

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