By Katherine K. Chan, Reporter
SLUGGISH economic growth and a still benign inflation outlook provide the Bangko Sentral ng Pilipinas (BSP) with ample room to deliver a sixth straight rate of interest cut at its first policy meeting this yr, analysts said.
Based on a BusinessWorld poll conducted last week, all 16 analysts surveyed expect the Monetary Board to scale back the goal reverse repurchase rate anew by 25 basis points (bps) on Thursday, Feb. 19.
If realized, the important thing policy rate would fall to 4.25% from the present 4.5%, the bottom in over three years or because the 3.75% in August 2022.
It will also match the benchmark rate set in September 2022.
For the reason that Monetary Board began its easing cycle in August 2024, it has to this point lowered borrowing costs by a complete of 200 bps.
The BSP began 2025 with a pause at its February meeting before delivering five consecutive 25-bp cuts, with the last two prompted by weak sentiment amid a growth slump.
Analysts said the disappointing fourth-quarter gross domestic product (GDP) print may outweigh other deciding aspects within the central bank’s monetary policy review, as one other round of easing is predicted to assist boost the economy.
“The Bangko Sentral ng Pilipinas will likely cut its policy rate by 25 basis points to 4.25% on Thursday to lend support to the economy, following a worse-than-expected fourth-quarter GDP consequence,” Moody’s Analytics Assistant Director and Economist Sarah Tan said in an e-mail.
In the ultimate quarter of 2025, the Philippine economy grew by 3%, its worst performance in 16 years (excluding pandemic period), because the flood control corruption mess continued to decelerate investments and spending.
This was even weaker than the revised 3.9% expansion seen within the third quarter, or when the flood control issue began to take a toll on the economy.
The graft scandal emerged following extensive flooding across the country that uncovered quite a few faulty, substandard and even nonexistent flood control projects.
Investigations later revealed that Public Works officials, lawmakers and personal contractors received kickbacks from the federal government’s infrastructure program.
This brought 2025 GDP growth to a post-pandemic low of 4.4%, falling below the federal government’s 5.5%-6.5% goal for the yr and the BSP’s 4.6% forecast.
“While the economic slowdown is essentially the results of massive spending cuts by the National Government, the chance of a slow recovery in investor sentiment may compel the BSP to bring the policy settings below the estimated 4% to five% neutral nominal rate more in order that each headline inflation and the exchange rate are at levels the BSP are comfortable with,” Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said in a Viber message.
In a note, Chinabank Research said further easing could fast-track economic recovery, especially because the BSP’s recent surveys indicated a dim outlook amongst consumers and businesses for the yr ahead.
“One other policy rate cut, which might further bring down lending rates, could provide additional incentive for consumers and firms to borrow within the near-term for big-ticket purchases and business expansion,” it said. “This might then strengthen the momentum of the country’s economic rebound.”
Based on the BSP’s latest Business Expectations Survey, businesses’ confidence index (CI) for the primary quarter of the yr fell to 23.7% from 49.5% within the previous quarter. For the following 12 months, it slipped to 40.4% from 48.1%.
Consumers were also less optimistic as their CI for the primary quarter was at 3.6% from 6.9% within the previous quarter, while it went all the way down to 11.8% from 14.1% for the approaching yr.
TAME INFLATION OUTLOOK
Meanwhile, analysts said the inflation outlook stays subdued whilst the buyer price index (CPI) has accelerated since December, which could justify further easing.
“The inflation outlook also stays benign, allowing BSP to give attention to supporting economic activity when prospects of reversing the sharp fiscal contraction and weak confidence still look uncertain at this point,” Euben Paracuelles, chief ASEAN economist at Nomura Global Markets Research, said in an e-mail.
In January, headline inflation picked as much as 2% from 1.8% in December but eased from the two.9% print last yr. It marked the primary time in a few yr that the CPI is back throughout the central bank’s 2%-4% goal.
“January CPI rose to 2% but stays on the lower end of the BSP’s 2-4% goal range, keeping price expectations broadly anchored whilst core inflation picked up, complicating — but not derailing — the case for further easing,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in an e-mail.
BSP Deputy Governor Zeno Ronald R. Abenoja earlier said inflation will likely hover across the midpoint of the goal throughout the first half of the yr.
He sees inflation exceeding 3% by the second half before cooling down and stabilizing below that mark.
By end-2026, headline inflation is predicted to average 3.2% before slowing to three% next yr, in accordance with the BSP.
Meanwhile, MUFG Global Markets Research noted that the widely expected quarter-point cut on Thursday risks diminishing the peso’s carry appeal.
“While rate cuts may help support growth, it also reduces the Philippine peso’s carry appeal, leaving the currency potentially vulnerable if the dollar strength re-emerges,” it said in a report.
The peso opened the yr weaker, trading across the P58- to P59-a-dollar level in January and even hitting a record low of P59.46 on Jan. 15. Nonetheless, the local unit has been gaining strength amid an underperforming US dollar previously weeks.
“Expectations of further Fed easing this yr — especially with the appointment of the relatively dovish Kevin Warsh as next Fed Chair — could help limit the peso’s weakness even with a narrower 50-bp differential,” Chinabank Research said.
At its first policy meeting for 2026, the Federal Reserve held its rates regular at the three.5%-3.75% range. The Fed has to this point lowered its benchmark rate of interest by 175 bps since September 2024.
LOOMING PAUSE
Meanwhile, BPI’s Mr. Neri said the anticipated 25-bp reduction on Thursday is a detailed call as he sees the BSP considering a “strategic pause.”
Still, he sees room for a second cut this yr either in April or June, before the Monetary Board stands pat throughout the rest of the yr.
“We expect the BSP to pause once it is obvious that headline inflation is headed above the three% level around (the third quarter),” Mr. Neri said. “We don’t see them cutting anymore after their June 18 meeting.”
Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., said he sees potentially another cut in the primary half depending on the first-quarter GDP growth numbers.
“The (first-quarter) GDP report for 2026 that will probably be published in May will probably be a much anticipated report and will give a sign if further cuts are needed and the way consumption has performed since (the fourth quarter), in addition to government spending and investments from the private sector,” he said in an e-mail. “The fear is the deceleration in consumption if this can get well back to trend.”
For this yr, the BSP forecasts Philippine GDP to expand by 5.4%, inside the federal government’s 5%-6% goal.
Meanwhile, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the BSP may cap its easing cycle after it trims the important thing policy rate to 4.25% this week as inflation will keep rising.
“For now, our view is that 4.25% will probably be the terminal rate, as monetary easing — in real terms — will proceed no matter further actual rate hikes, with inflation set to rise progressively throughout this yr (rising inflation amid a stable benchmark rate means the latter falling in real terms),” he said in an e-mail.
After Feb. 19, the Monetary Board is about to carry five more rate-setting meetings this yr on April 23, June 18, Aug. 27, Oct. 22 and Dec. 17.