PH rate-cutting run seen ending just as US tariffs bite deeper
The Philippines and its Asian neighbors are expected to wrap up their interest-rate cuts by early 2026—just as steeper US tariffs begin to bite more deeply into regional economies, Oxford Economics said.
The London-based research firm said most Asian central banks had room to cut further as real interest rates—or the actual cost of borrowing after factoring in inflation—are still elevated compared to prepandemic levels despite the easing actions this year.
That cushion, it said, could help offset the sting from Washington’s trade measures.
“We anticipate an additional 25 to 75 basis points of rate reductions across India, Indonesia, the Philippines, and Thailand, completing an easing cycle by early 2026,” Alexandra Hermann, lead economist at Oxford Economics, said in a note to clients.
“The full impact of tariffs on Asia has yet to materialize, according to our assessment, with a more pronounced drag on investment and labor markets likely to emerge in 2026 following the looming export slowdown,” Hermann added.
Lingering risks
Last month, the Bangko Sentral ng Pilipinas (BSP) slashed the overnight borrowing rate by a quarter point to 5 percent, a level that Governor Eli Remolona Jr. described as “Goldilocks”—neither too low to stoke inflation nor too high to restrict growth.
Reaching the neutral level took a total of 1.5 percentage points cut to the policy rate during the current easing cycle. But price risks remain, Remolona cautioned, particularly from energy and food costs.
The central bank could keep its policy rate unchanged through the end of the year if inflation remains subdued and demand holds up, the BSP chief said, signaling that the easing cycle is nearing its end.
till, Remolona left the door open to further easing, saying the Monetary Board could consider another reduction at its October or December meetings if demand falters amid headwinds at home and abroad.
Beyond rate cuts, Oxford Economics noted that some Asian economies enjoy a buffer in services that are less exposed to tariffs.
In the Philippines, where goods bound for the U.S. face a 19 percent levy, the fast-growing business-process outsourcing industry—now stretching into higher-value IT and knowledge services—continues to prop up household spending and foreign-exchange inflows, the research firm noted.
“If paired with broader productivity-enhancing reforms, these sectoral anchors could provide important upside to regional growth, offsetting some of the expected trade-induced slowdown,” Hermann said.
