— Credit: Bangko Sentral ng Pilipinas
By Katherine K. Chan
THE BANGKO SENTRAL ng Pilipinas (BSP) may cut benchmark rates by one other 25 basis points (bp) next yr to finish its current easing cycle, its chief said on Friday, but ruled out an off-cycle or jumbo move.
Asked what number of cuts the central bank has room for next yr, BSP Governor Eli M. Remolona, Jr. said: “Isa lang (Only one). Depends upon the information.”
He nonetheless ruled out an aggressive motion as this might send the improper signal to markets.
“The cut is since the economy is weak, and demand has also weakened. So, on the demand side, we can assist,” Mr. Remolona told reporters on the sidelines of the 4th Digital Financial Inclusion Awards. “But when we (deliver a) 50-bp or (an) off-cycle (cut), it can worsen the lack of confidence because they might say, ‘the BSP is desperate.’ That’s normally the way it goes.”
“It is probably going that if we deliver a rate cut, it can be during an everyday meeting, not off-cycle.”
Mr. Remolona added that they should not considering their “Goldilocks” rate for now as they’re still refining their estimates.
“So, for now, we are going to just give attention to the output gap.”
At its last review for the yr held on Thursday, the Monetary Board trimmed benchmark borrowing costs by 25 bps for a fifth meeting in a row to bring the policy rate to 4.5%, its lowest in over three years, as expected by 17 of 18 analysts in a BusinessWorld poll.
It has now lowered rates by a complete of 200 bps for this easing cycle that began in August last yr.
The Monetary Board will hold its first meeting for 2026 in February.
WEAK GROWTH
For its part, Fitch Solutions unit BMI said it expects the BSP to deliver two more reductions next yr amid dismal Philippine growth prospects, at the same time as Mr. Remolona already signaled an imminent end to their rate-cut cycle.
It said in a note on Friday that two 25-bp cuts may come early next yr as they’re “more pessimistic” on their outlook for the economy. BMI expects Philippine gross domestic product (GDP) to expand by 5.2% next yr.
“On one hand, the lagged effects of 200 bps of rate cuts since August 2024, together with a swift recovery in government spending, could bolster growth and reduce the necessity for added cuts,” it said. “However, further unravelling of the corruption scandal across other infrastructure projects beyond flood control projects could dampen business sentiment and extend government underspending, widening the output gap.”
“With 2026 inflation inside BSP’s goal range, BSP could opt to ease rates further to support the economy.”
Mr. Remolona said on Friday that GDP growth could slow further to three.8% this quarter from the over four-year low of 4% within the July-September period. This could bring the full-year average below 5% versus the federal government’s 5.5-6.5% goal.
The BSP chief said on Thursday that they expect the economy to recuperate by the second half of 2026, with growth seen moving closer to the federal government’s 6-7% goal only by 2027.
Meanwhile, BMI said the peso’s weakness will persist amid a slump in foreign direct investments (FDI). It expects the exchange rate to average about P58.50 against the dollar next yr.
FDI net inflows plunged to a five-year low in September at $320 million, down 25.8% from $432 million yr on yr, latest central bank data showed.
The peso sank to a fresh record low of P59.22 on Dec. 9 but returned to the P58 level on Thursday following the BSP’s policy decision.