ANALYSTS expect the Bangko Sentral ng Pilipinas (BSP) to continue cutting key interest rates this year and then hold settings in 2027, the central bank said in its latest monetary policy report.
The December edition of the report, which was released last Friday, said that most of those polled in a November survey of external forecasters expect 25 to 75 basis points of rate cuts to be ordered in 2026.
The poll was conducted before the BSP cut interest rates by another 25 basis points last Dec. 11. Since then, central bank Governor Eli Remolona Jr. has said that the BSP could lower interest rates once more this year unless the data springs a “bad surprise.”
The December rate cut was prompted by benign inflation and a weaker outlook for economic growth, and the BSP at that time also said that its policymaking Monetary Board saw the current easing cycle as “nearing its end.”
Many analysts still see two more cuts to be announced this year given the need to support economic growth, which markedly slowed to 4.0 percent in the third quarter and is likely to have missed the 5.5- to 6.5-percent target for 2025.
Preliminary fourth-quarter and full-year results are scheduled to be released on Jan. 29.
Remolona last week said that 2025 growth likely fell to 4.6 percent but could rebound to 5.4 percent this year and improve further to 6.0-6.2 percent in 2027, within the government’s revised targets of 5.0-6.0 percent and 5.5-6.5 percent.
He said the BSP was likely to deliver one more cut this year, possibly as early as next month, as they were “very close to where we want to be in terms of the policy rate.”
The central bank’s target reverse repurchase rate currently stands at 4.5 percent.
Continued below-target growth, however, could lead to “one more cut beyond the 25 basis points,” Remolona said.
“[T]hat would require a bad surprise in the data. Given the data we have right now and given the projections based on our data, we’re not going to cut [twice],” he said.
“[T]he numbers have to move somewhat for us to be convinced to cut one more time.”
The November survey of forecasters saw analysts projecting 2.9-percent inflation this year and 3.0 percent in 2027, within the BSP’s 2.0- to 4.0-percent target. The outlooks were also lower than in the October survey round.
Still, analysts flagged upside risks that could affect prices. These include “adverse weather conditions that could exacerbate food supply issues, upward adjustments in electricity rates, wage hikes, external developments and tariffs, and base effects.”
“The downside risk is seen to emanate from governance issues related to flood control projects, which could dampen the growth and inflation outlook,” the central bank said.
The BSP expects inflation to settle at 3.2 percent this year and 3.0 percent in 2027, down from the 3.3 percent and 3.4 percent seen in August.
It also said that the growth outlook for 2026 had been lowered, with an investment slowdown tied to a corruption scandal expected to persist in the first half.
Growth next year will likely be slightly higher, the central bank said, “supported by the lagged impact of the BSP’s policy rate cuts since August 2024.”
These projects, the BSP said, “assume no further adjustments to either the policy interest rate or the reserve requirement ratio over the forecast horizon.”