THE Hongkong and Shanghai Banking Corp. Ltd. (HSBC) said that the Bangko Sentral ng Pilipinas (BSP) is expected to follow the Federal Reserve in terms of monetary easing this year.

The HSBC predicted that it will start with the 25-basis point cut in the second quarter.

HSBC economist for the Association of Southeast Asian Nations (ASEAN) Aris Dacanay noted that the banking giant expects the Federal Reserve to start cutting in June by 25 basis points.

"Our outlook is that the moment the Fed cuts, the BSP cuts to be in lockstep," he said.

Dacanay added that the local central bank is expected to follow suit in policy easing both in terms of timing and in size.

"We are now in an environment where rates are high for long, which of course, the BSP needs to take into consideration as well, and at the same time, we are in an environment where inflation tends to be higher due to trade barriers," Dacanay said.

He added that the expected inflation for this year is expected to average between 3.5% this year.

"On a year-on-year figure, it will break the target but we need to look at it on a sequentially annual basis, which is basically if you remove the base effects," Dacanay said.

"Right now, inflation momentum is running at 0.2% month-on-month, so if you annualize that sequentially, and if this month-on-month momentum continues on in the next 12 months, inflation would actually be 2.4%," he explained.