MONETARY authorities are expected to keep the policy rate on hold for a while to assess the impact of previous cuts before easing for one more time this year, analysts said.
The Bangko Sentral ng Pilipinas (BSP) policymaking Monetary Board cut key interest rates by another 25 basis points last Thursday, citing manageable inflation and weaker-than-expected economic growth.
It dropped language that the easing cycle was nearing its end, which some analysts have taken as meaning that another cut is likely as early as April, but BSP Governor Eli Remolona Jr. provided no clear forward guidance, citing economic uncertainties that make the path of future policy adjustments chancy.
“Our base-case remains for an extended pause hereon, but the risk scenario of a further rate cut in April remains, depending on how quickly confidence recovers,” Citi Philippines said in a commentary.
Citi said the central bank was likely to remain cautious, emphasizing that monetary policy works with a long lag.
“We think from hereon, policymakers will be weighing the potential benefits of further monetary easing against the risk of de-anchoring inflation expectations,” it said.
“After all, the current growth slowdown has been driven primarily by government spending bottlenecks rather than a private sector demand shock.”
Gross domestic product (GDP) growth slowed to 4.4 percent last year, falling below target for a third straight year and weighed down by a corruption scandal that disrupted infrastructure spending and sentiment.
Citi expects economic growth to slow further to 3.5- to 4.0-percent range in the first half of 2026 as implementation delays remain possible due to ongoing governance-related reforms, which could temper the pace of the rebound even as infrastructure and other state-led projects resume.
Meanwhile, Metrobank Research said that with inflation expected to pick up in the second half, the BSP was likely to implement any additional rate cuts sooner rather than later.
This will come before the release of preliminary first-quarter growth data that are expected to show weaker growth.
“Given the urgency to support growth, the BSP will likely do a preemptive cut ahead of the data release,” Metrobank Research said.
“Metrobank maintains its forecast that the BSP will delivery another policy rate cut before concluding its current easing cycle,” it added.
“From then on, we continue to anticipate that the BSP will keep policy rates steady in 2027.”
Metrobank said the latest BSP policy rate cut had narrowed the interest rate differential (IRD) to 50 basis points, putting some pressure on the peso that has been trading around the P57 level in recent days.
The peso is expected to recover once the US Federal Reserve implements an anticipated rate cut in March, which would widen the IRD back to 75 basis points.
However, domestic challenges are likely to continue limiting the peso’s gains, particularly given the country’s current account position.
Metrobank maintained its end-2026 and end-2027 dollar-peso forecasts at P59.7 and P58.5, respectively.
