By Katherine K. Chan
THE BANGKO SENTRAL ng Pilipinas (BSP) is widely expected to ease for a fifth straight meeting on Thursday as economic growth slows and inflation stays below goal, analysts said.
A BusinessWorld poll conducted last week showed that 17 out of 18 analysts surveyed expect the Monetary Board to chop the goal reverse repurchase rate by 25 basis points (bps) on Dec. 11. That is the board’s last policy review meeting of the 12 months.
If realized, the benchmark rate will fall to 4.5% from the present 4.75%. At 4.5%, this could be the bottom policy rate in over three years or for the reason that 4.25% in September 2022.
Within the BusinessWorld poll, just one analyst, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco, sees the BSP delivering a 50-bp cut.
The central bank has to this point reduced borrowing costs by a cumulative 175 bps because it began its easing cycle in August last 12 months. It delivered a 25-bp cut at each of its meetings in April, June, August and October.
Moody’s Analytics Assistant Director and Economist Sarah Tan said the dismal third-quarter growth and easing inflation print may prompt a 25-bp rate cut on Thursday.
“Weaker-than-expected third-quarter GDP (gross domestic product) growth and a low-inflation environment together strengthen the case for further easing, whilst risks of stronger price pressures linger,” she said in an e-mail. “These forces should outweigh concerns in regards to the peso’s recent depreciation.”
Within the July-to-September period, the Philippine GDP expanded by 4%, its slowest pace for the reason that first quarter of 2021, as consumer and investor sentiment waned amid the continued public infrastructure corruption mess.
The country’s economic growth averaged 5% within the nine-month period, below the federal government’s 5.5-6.5% goal for 2025.
Cid L. Terosa, a senior economist on the University of Asia and the Pacific, said the BSP will likely deliver a 25-bp cut in light of slowing economic growth each here and abroad, in addition to a weaker pace of household spending.
“(The Philippine economy) doesn’t seem to indicate signs of recovering from the effect of corruption scandals all throughout the country,” Mr. Terosa said.
For Mr. Chanco, the weaker-than-expected GDP growth within the third quarter, coupled with benign inflation, could support a jumbo cut by the central bank.
“A rate cut (on Dec. 11) is sort of a given, the query is by how much, and we suspect that the very weak Q3 GDP print is reason enough for the Monetary Board to go together with a bigger 50-bp cut, especially with inflation still well under control,” Mr. Chanco said in an e-mail.
In November, headline inflation eased to 1.5% from 1.7% in October and a pair of.5% a 12 months earlier amid slower price increases in food and non-alcoholic beverages, with food inflation posting a 0.3% decline through the month.
This brought the 11-month inflation average to 1.6%, below the BSP’s 1.7% full-year projection. November marked the ninth month in a row that inflation undershot the BSP’s 2-4% goal.
Chinabank Research, which also anticipates a rate cut, said below-target inflation and well-anchored inflation expectations give the BSP room to proceed easing.
“A more accommodative policy could also offer support for the Philippine economy, which grew weaker than expected within the third quarter and continues to face challenges from each the domestic and external fronts,” Chinabank Research said.
Deutsche Bank economist for the Philippines Junjie Huang said the central bank may ease further as they see slow growth through yearend.
“Q4 GDP growth should be fairly weak amid lingering effects of constrained public spending… To reflect such a challenge, we revised down our GDP growth forecast to 4.1% 12 months on 12 months in Q4 from 5.4%, which in turn points to a wider negative output gap and thereby eliciting a policy motion by BSP,” he said in a note.
Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said lower borrowing costs may spur spending, capital expenditures and overall economic activity.
BSP Governor Eli M. Remolona, Jr. earlier said that the Philippine GDP might grow by only 4-5% by yearend, well-below the federal government’s 5.5-6.5% goal.
Meanwhile, Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said that the anticipated rate cut by the US Federal Reserve at its last policy meeting this 12 months also allows the BSP to have a more accommodative monetary policy stance.
“Global easing trends, particularly the Fed’s expected cut, also provide room for BSP to act without putting undue pressure on the peso,” he said in an e-mail.
The Fed has to this point lowered its key policy rate by 150 bps since September 2024, bringing it to the three.75-4% range. It’s scheduled to have its last meeting this 12 months on Dec. 9 and 10.
“A rate cut from each the Fed and the BSP (this) week would keep the rate of interest differential at 75 bps, which could then help stave off any additional depreciation pressure on the peso,” Chinabank Research said.
The peso hit the P59-per-dollar level several times in November, even reaching a fresh low of P59.17 versus the greenback on Nov. 12.
FURTHER EASING IN 2026
Meanwhile, analysts see further monetary policy easing next 12 months amid a dim growth outlook.
“(I’m) expecting yet one more 25-basis-point rate cut next 12 months that may happen in the primary quarter as GDP is more likely to show sluggishness within the fourth quarter of this 12 months with inflation to finish this 12 months at sub-two percent,” Security Bank Chief Economist Angelo B. Taningco said in an e-mail.
The BSP chief has said that the economy would only fully get better by 2027 but noted that a slight rebound might come by the center of next 12 months.
Maybank Investment Bank economist Azril Rosli projects two more 25-bp cuts next 12 months, with the primary one more likely to are available the primary half, as he expects inflation to settle at 2.2% in 2026.
“Price pressures proceed to ease, with rice prices softening resulting from stronger domestic harvests and lower global prices, though the BSP will proceed monitoring the impact of rice import restrictions on supply and retail markets,” he said in an e-mail. “Upside risk is the combined effects of rice policy adjustments, base effects, and higher electricity rates.”
The suspension of normal and well-milled rice imports will likely be temporarily lifted in January but will likely be reimposed from February to April.
The flexible tariff scheme on rice will likewise take effect on Jan. 1, wherein the levy on the staple grain will likely be adjusted by 5 percentage points every 5% change in global prices as much as a maximum of 35%. The National Government currently imposes a 15% tariff on rice.
Meanwhile, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. also expects the central bank’s easing cycle to finish once the benchmark rate of interest settles at 4% but flagged risks of excessive easing.
“A gradual easing path could bring the policy rate right down to 4% in 2026, providing support to an economy that may likely depend more on monetary policy within the near term given the constraints on fiscal spending,” he said in a note.
“Nevertheless, excessive rate cuts may carry risks as inflation could rise again in 2026. An excessively aggressive easing cycle could force the BSP into an abrupt reversal should inflation pick up unexpectedly, potentially resulting in sharper-than-ideal rate hikes afterward,” he added.
The BSP projects inflation to return to the goal range by 2026 at 3.1%, before slowing anew to 2.8% in 2027.